Proteomics International
Annual Report 2020

Plain-text annual report

P I L L Proteomics International L A B O R AT O R I E S LT D Annual Report 202 0 ACN 169 979 971 ASX: PIQ 2 0 2 0 P I L L Corporate Directory Directors Mr Terry Sweet - Non-Executive Chairman Dr Richard Lipscombe - Managing Director Mr Roger Moore - Non-Executive Director Mr Paul House - Non-Executive Director Company Secretary Ms Karen Logan Principal Place of Business QEII Medical Centre, QQ Block 6 Verdun Street Nedlands WA 6009 T: +61 8 9389 1992 E: enquiries@proteomicsinternational.com W: www.proteomicsinternational.com Registered Office Suite 13, The Atrium 123A Colin Street West Perth WA 60058765432 Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd Auditors BDO Audit (WA) Pty Ltd 38 Station Street Subiaco, WA 6008 Accountants S Pugliese Suite 13, Level 1 123A Colin Street West Perth, WA 6005 Share Registry Automic Group PO Box 5193 Sydney NSW 2001 T: 1300 288 664 E: hello@automic.com.au W: automicgroup.com.au Stock Exchange ASX Level 40, Central Park 152-158 St George’s Terrace Perth WA 6000 ASX Code: PIQ Corporate Advisor & Investor Relations Candour Advisory Dirk Van Dissel T: +61 408 326 367 E: dirk@candouradvisory.com.au Contents FROM THE CHAIR KEY ACHIEVEMENTS WINDOW ON THE SCIENCE - The role of proteins in disease TECHNOLOGY SNAPSHOT - The PromarkerTM platform DIRECTORS’ REPORT REVIEW OF OPERATIONS BOARD OF DIRECTORS AND OPERATIONAL TEAM MATERIAL BUSINESS RISKS REMUNERATION REPORT AUDITOR’S INDEPENDENCE DECLARATION FINANCIAL STATEMENTS Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flow Notes to the Consolidated Financial Statements DIRECTORS’ DECLARATION INDEPENDENT AUDITOR’S REPORT SHAREHOLDER INFORMATION GLOSSARY 2 3 5 6 8 9 25 28 30 38 40 41 42 43 44 72 73 76 79 1 Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L P I L L From the Chair Dear Fellow Shareholder, It is my privilege, on behalf of your Board, to introduce Proteomics International’s annual report, reviewing activities and achievements for the year ended 30 June 2020. This year more than ever we are reminded of the value of medical technology and scientific research. I have been proud of the professionalism, flexibility and dedication shown by Proteomics International staff amid the COVID-19 pandemic. It has been a productive 12 months for the Company, with the focus our flagship diagnostic product - the PromarkerD test for predicting diabetic kidney disease. The Company achieved three pivotal commercialisation milestones over the year, with a successful global study with Janssen Research & Development, validation of an easy-to-use immunoassay version of the test, and CE Mark regulatory approvals for PromarkerD in Europe. In late 2019, Proteomics International commissioned of a suite of state-of-the-art instruments in our laboratory, as part of a Public Private Partnership to expand the Western Australian Proteomics Facility. This collaboration gives the Company an enhanced ability to identify potentially valuable biomarkers across medicine, veterinary health and agriculture. Aided by the equipment upgrade, the Promarker™ R&D pipeline has been expanded targeting new diagnostic tests in areas with significant unmet need. Excitingly, promising proof of concept results have already provided a potential breakthrough for Proteomics International in the effort to create a world-first test for endometriosis. For the year ahead the team is focused on our commercial goals and to take PromarkerD into the clinic world-wide. We thank you for your continued investment in Proteomics International Laboratories as we look forwards to realising our vision: To help create a world where disease is detected early and cured simply. Yours sincerely, Terry Sweet Chair, Proteomics International Key Achievements PromarkerD • Immunoassay In Vitro Diagnostic Test (IVD) validated Successful validation makes PromarkerD available on a cost-effective, easy-to-use technology platform servicing the Laboratory Developed Test and IVD markets, with the results presented at the 18th Human Proteome Organization World Congress. • Technology transfer opens door to new markets in Europe PromarkerD mass spectrometry technology successfully transferred to clinical diagnostics partner Atturos in Ireland. Test launched in Spain under exclusive licence agreement with Patia Europe. • Test effectiveness confirmed in major clinical studies Ongoing collaboration with global pharmaceutical giant Janssen Research & Development showed the power of PromarkerD for predicting diabetic kidney disease in a 3,000-strong international study. These results were co-presented at the world’s pre- eminent diabetes conference, the 80th Scientific Sessions of the American Diabetes Association. Separate clinical results published in a peer- reviewed journal demonstrated that PromarkerD has excellent negative predictive value ("rule-out" capability) in patients with type-2 diabetes. • First Regulatory Approvals Three European CE Mark registrations achieved covering the high-throughput immunoassay kit PromarkerD (IA), mass spectrometry test PromarkerD (MS), and PromarkerD Hub. TGA regulatory approval secured for PromarkerD software hub as an in vitro diagnostic (IVD) for export use. • Intellectual Property portfolio expanded Further patents granted in Brazil, Canada and Indonesia. IP portfolio now includes trade secrets, plus patents and trademarks covering 273 million (59%) of the world diabetes population. Diagnostics • Cutting-edge protein biomarker analysis facility launched Over $4m invested via a Public Private Partnership to provide a world-leading facility that boosts Proteomics International’s ability to identify biomarkers and offer analytical services. • Successful proof of concept study for diagnostic test for endometriosis Newly-identified biomarkers provided breakthrough for Proteomics International in the effort to create a world-first test for endometriosis. These biomarkers were successfully validated in a proof of concept study performed on 54 women which returned statistically significant results, and the Company has filed a patent on its invention. • Diagnostics R&D expanded Promarker™ R&D expanded to include endometriosis, the gastroenteritis-causing Giardia parasite, chronic lung conditions, cancer, oxidative stress, plant dieback, diabetic retinopathy and COVID-19. • COVID-19 research grants awarded $200,000 in funding awarded to support Proteomics International's R&D programs for a rapid diagnostic test of the SARS-CoV-2 virus, and to isolate biomarkers that give insights into progression of the disease. Analytical Services & Corporate • Revenue from continuing operations sustained Achieved record income exceeding $3m built upon strong analytical services revenue and biomarker focused research grants, in combination exceeding $1.6 million. • Revenue driven by diversified business model Contracts secured across pharmacokinetic (PK) testing, biomarker analysis, biosimilars testing, consulting and specialist analytical work (e.g. food product quality control on A2 milk). • Enters Western Australian Exporters Hall of Fame In recognition of winning the Health & Biotechnology Award in three of the last four years Proteomics International was inducted into the Western Australian Industry & Export Awards Hall of Fame, exemplifying the global breadth of the company's client base. • $3 million raised in heavily oversubscribed Placement Successful capital raising added new institutional, family office and high net worth investors to the share register and provided funds for the commercialisation of PromarkerD, upgraded laboratory instruments and expansion of the diagnostic products pipeline. 2 3 P I L L Proteomics International I D E N T I T Y Proteomics International is a medical technology company specialising in predictive diagnostics and advanced analytical services using proteomics - the industrial scale study of the structure and function of proteins. M I S S I O N To improve the quality of lives by the creation and application of innovative tools that enable the improved treatment of disease. V I S I O N To help create a world where disease is detected early and cured simply. Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L Window on the Science The role of proteins in disease From the common cold to kidney disease, our bodies produce different proteins when we are sick. Why study proteins? Proteins are made up of hundreds or thousands of building blocks called amino acids, strung together in long chains. They do most of the work in cells and are required for the structure, function and regulation of our tissues and organs. Proteins are produced by the body from ‘instructions’ encoded in our DNA. But unlike our genes, the type and amount of proteins we produce changes over the course of our lives. Proteins tell us what is happening in our bodies right now. This offers a whole new level of diagnosis and treatment for disease. Infectious diseases Some diseases involve an infection by microorganisms like bacteria or viruses. The invading pathogen causes the immune system to go into overdrive. The body produces antibodies, a type of protein that binds to microorganisms to help fight them. These antibodies are specific to the infection, and are stored so that if we get sick again our body has the right protein tools to protect itself. Microscope image of E. coli bacteria. Non-infectious diseases Other diseases, such as diabetic kidney disease and endometriosis, are influenced by both our genes and lifestyle. In these non-infectious diseases, the way proteins behave can tell us a lot about what is happening in the body. In some cases, someone developing a serious disease will be asymptomatic, with physical symptoms presenting only too late. By looking at specific proteins expressed by an individual, diseases can be predicted and treated before serious damage occurs. The kidney (left). In diabetic kidney disease the glomerulus (purple) is damaged, often without evident symptoms. 4 5 Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L P I L L Technology Snapshot The Promarker™ platform Proteomics International’s proprietary technology identifies the proteins that give insight into disease. Biomarker discovery The human body contains an estimated 20,203 genes coding for proteins. However, there are multiple levels of regulation and modification between reading a gene and producing the final protein product. As a result, over 200,000 proteins are predicted to co-exist in the human body, interacting in a complex network. Proteomics International uses its Promarker™ platform to identify biomarkers - protein ‘fingerprints’ associated with disease. These biomarkers can be used to diagnose medical conditions, or predict whether a person will develop a disease in the future. How the Promarker™ platform works DISCOVERY Blood samples are collected from patients with and without a disease, such as diabetes or endometriosis. The proteins in the blood samples are analysed using a mass spectrometer. This instrument is able to find and measure specific low-abundance proteins in a complex sample, comparable to finding one specific person hiding amongst the 7.8 billion people on earth. Mass spectrometry works by detecting the size of particular proteins, fragmenting the protein into smaller pieces, and then analysing the pieces based on their mass. The mass spectrometer can identify whether particular proteins are present, and how much of them are in each sample. The samples from people with the target disease are compared to those without the disease. In some cases, protein ‘fingerprints’ associated with the disease can be identified. These are called biomarkers. PROOF OF CONCEPT The effectiveness of the biomarkers as a test for the target disease are verified in a follow up study. Those biomarkers that prove to be stable and readily detectable are used to develop a test for the disease. CLINICAL STUDY The biomarker test is validated in a much larger clinical cohort, enrolling more than 500 people with the target disease. A successful test that can accurately predict or diagnose disease is an innovative tool enabling the improved treatment of disease. Changing lives The Promarker™ platform’s strength lies in its ability to be applied to any condition - from chronic health conditions including diabetes, cancer and Alzheimer’s disease to acute diseases such as bacterial and viral infections. Promarker™ technology has already been used to develop the PromarkerD test for predicting diabetic kidney disease, which is being commercialised around the world. Proteomics International is currently researching multiple biomarkers as part of its Promarker™ pipeline. For more information, see the Diagnostics section (page 18). Post-validation, biomarker tests are commercialisation- ready, helping to create a world where disease is detected early and cured simply. PromarkerD Proteomics International’s PromarkerD test searches for proteins in the blood associated with diabetic kidney disease. The test uses a panel of three biomarkers, combined with clinical factors, to predict the onset of the disease up to four years in advance. 6 7 P I L L Directors’ Report Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L The Directors present their report on Proteomics International Laboratories Ltd (ASX:PIQ; Proteomics International or the Company) and the consolidated entity (referred to hereafter as the Group) for the year ended 30 June 2020. DIRECTORS The Directors of the Company in office during the financial year and until the date of this report are as follows: Mr Terry Sweet Dr Richard Lipscombe Mr Roger Moore Mr Paul House (Appointed 9 June 2014) (Appointed 9 June 2014) (Appointed 14 October 2016) (Appointed 22 November 2017) (Non-Executive Chairman) (Managing Director) (Non-Executive Director) (Non-Executive Director) OPERATING RESULT To be read in conjunction with the attached Consolidated Financial Report (see page 40). The operating result for the year was: Loss before income tax (16%) $1,743,770 $2,080,275 Loss for the year (16%) $1,743,770 $2,080,275 Change 2020 2019 CONSOLIDATED Comprising Revenue and Other income Expenses 10% (1.2%) $3,016,274 $4,760,044 $2,736,312 $4,816,587 The Group's financial report for the year ended 30 June 2020 includes: • Operating revenue grew 8% to $1.59 million, with analytical services based contract research remaining robust despite economic uncertainties and supplemented by research grants. • Combined income from all sources rose 10% to $3.02 million, encapsulating revenue from analytical services and research grants, State and Federal COVID-19 stimulus packages and the R&D Tax Incentive. • Operational expenditure was unchanged at $4.8 million, and focused on the commercialisation of PromarkerD, upgrading of laboratory instruments, and expansion of the diagnostics pipeline. • The loss from ordinary activities decreased 16% to $1.74 million, which reflects normal operational costs and non-cash items and includes a share based payments expense of $112,715. • The net cash outflow from operating activities was $384,508, a reduction of 77%. • At 30 June 2020 the Company had cash reserves of $2.37 million, and trade and other receivables of $0.36 million. On the back of the Company's research and development focus it anticipates an R&D Tax Incentive cash rebate of $1.14 million, to be received in the December quarter 2020. DIVIDENDS No dividend was paid during the year and the Board has not recommended the payment of a dividend. ISSUED CAPITAL 92,405,875 fully paid ordinary shares (ASX: PIQ) and 4,390,279 unlisted options were on issue as at 30 June 2020. ANNUAL GENERAL MEETING In accordance with ASX Listing Rules 3.13.1 and 14.3, Proteomics International advises that its 2020 annual general meeting (AGM) is scheduled to be held on 26 November 2020. The Company encourages shareholders to attend the AGM and receive an update on the strategy and initiatives of the Group. Review of Operations 8 9 P I L L Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L Review of Operations A growth cycle driven by the Company’s strengths Principal activities Proteomics International is a pioneering medical technology company operating at the forefront of predictive diagnostics and bio-analytical services. The company specialises in the area of proteomics - the industrial scale study of the structure and function of proteins. Proteomics International's business model is centred on the commercialisation of the Company's pioneering test for diabetic kidney disease, PromarkerD. The Company offsets the cash burn from R&D and product development through provision of specialist analytical services, whilst using its proprietary Promarker™ technology platform to create a pipeline of novel diagnostic tests. Proteomics International is a wholly owned subsidiary and trading name of Proteomics International Laboratories Ltd (PILL; ASX: PIQ), and operates from state-of-the-art facilities located on the QEII Medical Campus, Perth, Western Australia. 1. PromarkerD 2. Diagnostics Targeting the global diabetes epidemic, PromarkerD is a predictive diagnostic test for diabetic kidney disease, a progressive disorder found in one in three adults with diabetes. The prevalence of kidney disease is rising rapidly and many patients progress to need dialysis or a kidney transplant. In peer reviewed clinical studies PromarkerD correctly predicted 86% of otherwise healthy diabetics who went on to develop chronic kidney disease within four years1. Proteomics International's diagnostics development is made possible by the Company’s proprietary biomarker discovery platform called Promarker™, which searches for protein ‘fingerprints’ in a sample. This disruptive technology can identify proteins that distinguish between people who have a disease and people who do not, using only a simple blood test. It is a powerful alternative to genetic testing. The technology is so versatile it can be used to identify ‘fingerprints’ from any biological source, from wheat seeds to a blood sample. The global biomarkers market is expected to exceed USD 118 billion by 20262. 3. Analytical Services Specialist contract research focusing on biosimilars quality control and pharmacokinetic testing for clinical trials. Australia is a global leader in clinical trials due to its efficient regulatory framework and high-quality trial sites, and all samples from each trial require specialist analytical testing. Significantly, the fastest growing class of drugs entering clinical trials is biologics and biosimilars. The global clinical trials market is projected to reach USD 68.9 billion by 20263, whilst the market size of the global biosimilar market was valued at USD 5.95 billion in 2017, and is projected to reach USD 71.97 billion by 20274. The global proteomics market was valued at USD 24.4 billion in 2017, and is expected to reach USD 72.4 billion by 20255. 1. For further information see the PromarkerD web portal: www.PromarkerD.com 2. Grand View Research 2019: Biomarkers Market Size 3. Grand View Research 2019: Clinical Trials Market Size 4. Markets and Markets 2019: Biosimilars Market by Product 5. Allied Market Research 2019: Proteomics Market Outlook 2025 PromarkerD Proteomics International achieved three pivotal milestones in the commercialisation of PromarkerD in 2019-20: a successful global study validating the predictive power of the test in partnership with Janssen Research & Development LLC (Janssen), development and validation of a cost-effective immunoassay version of the test, and regulatory approval of PromarkerD in Europe. These achievements are ensuring this ground-breaking technology is fit for purpose for a diverse global audience that includes diagnostic and pharmaceutical companies, clinical professionals, and of course, patients with diabetes. PromarkerD Test Available for Global Use Simple Technology Platform PromarkerD Immunoassay Ready ✓ Seeking certified laboratories to introduce the PromarkerD immunoassay as an LDT High Statistical Performance ✓ Peer reviewed publications - Analytical & clinical validity evidence Regulatory Approval in Europe ✓ CE Mark registration received for the PromarkerD Immunoassay Big Pharma Interested Enormous Market Collaboration with Janssen - Global multi-centre clinical study 463m adults have diabetes globally - 1 in 3 currently have DKD ✓ ✓ Therapeutic Treatments Available ✓ SGLT2 inhibitor class drugs with renal protection approved for type 2 diabetes treatment Reimbursement ✓ Engaged industry leading consultant to obtain a unique US reimbursement code IVD CDx LDT PromarkerD About PromarkerD PromarkerD is a predictive test for the early identification of diabetic kidney disease. In published clinical studies, PromarkerD correctly predicted which otherwise healthy diabetics went on to develop chronic kidney disease within four years. Further information is available through the PromarkerD web portal: www.PromarkerD.com 10 11 Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L PromarkerD - Regulatory REGULATORY APPROVALS CE Mark registration in Europe Proteomics International achieved CE Mark registration for both the immunoassay (IA) and mass spectrometry (MS) versions of the PromarkerD test. The Company also secured CE Mark registration for the PromarkerD Hub, a software tool used to calculate the risk of kidney disease. The CE Mark provides a significant step for Proteomics International to license and sell PromarkerD throughout the European Union. It provides assurance to European consumers and potential licensing partners that the product has been developed and manufactured to meet EU safety, health and environmental protection requirements. Importantly, these registrations lay the groundwork for future regulatory approvals, including an application to the US FDA. TGA approval for software IVD Proteomics International secured TGA regulatory approval for PromarkerD software as an in vitro diagnostic (IVD) for export use. The software was included on the Australian Register of Therapeutic Goods on the 24 July 2019. The remote software hub enables the secure delivery of test results to Proteomics International's partners around the world, and provides an additional level of intellectual property security beyond the company’s comprehensive patent portfolio. Further Regulatory approvals and Reimbursement The successful production of the PromarkerD immunoassay and its move towards clinical use globally means further regulatory approvals will be required in other jurisdictions. As the party responsible for the manufacture and distribution of a medical device (kit) Proteomics International requires specific quality management systems, of which ISO 13485 is the industry's most widely used international standard. Proteomics International has adopted the ISO 13485 guidelines for PromarkerD and is in the process of acquiring formal certification. Both CE Mark and ISO 13485 demonstrate a commitment to the safety and quality of medical devices, and are recognised in multiple countries world-wide. In the USA, PromarkerD will initially be sold as a Laboratory Developed Test (LDT) via a CLIA (Clinical Laboratory Improvement Amendments) certified clinical laboratory. To assist routine use Proteomics International will seek FDA regulatory approval for the PromarkerD immunoassay kit under the 'De novo' or '510(k)' pathways. Prior to approval the US FDA requires medical device companies to also comply with FDA 21 CFR Part 820. The US FDA is currently updating these guidelines to harmonise with ISO 13485. Medical reimbursement costs for diagnostics tests are covered by different policies worldwide. A primary target for to secure a specific is Proteomics reimbursement code for PromarkerD in the USA, and to achieve this the Company is currently engaging with key industry stakeholders via a specialist US consultant. International P I L L PromarkerD - Technology TECHNOLOGY PLATFORMS Advanced immunoassay validated Proteomics International announced the validation of its PromarkerD immunoassay In Vitro Diagnostic Test (IVD) platform in September. The immunoassay has been designed using the advanced CaptSureTM technology (see 2019 Annual Report) and has now commenced production with the Company's manufacturing partners TGR BioSciences (an Abcam Company). Shelf-life and long-term product performance testing will form an ongoing component of the commercial roll-out of the assay. The successful validation makes the PromarkerD test for diabetic kidney disease available on two technology platforms (mass spectrometry and immunoassay). The PromarkerD immunoassay technology can be used as a Laboratory Developed Test (LDT), manufactured as an In Vitro Diagnostic (IVD) test kit, or configured to run on automated immunoassay platforms to meet the diverse needs of clinical diagnostics laboratories around the world. PromarkerD in the Clinic TEST RESULTS Technology transfer opens door to new markets in Europe Proteomics International and clinical diagnostics firm Atturos successfully transferred the PromarkerD test system to Atturos’ laboratories in Ireland. Proteomics International and Atturos scientists undertook a stringent validation process of the PromarkerD method, and demonstrated data equivalence in 100 patient samples analysed in both laboratories. The results of this successful "cross-over" study were presented at the 18th Human Proteome Organization World Congress in Adelaide in September. The achievement made PromarkerD available as a MS-LDT to licence partners in Europe, allowing the Company to launch PromarkerD in Spain under a licence agreement with Patia Europe. RISK SCORE % 0 10 20 100 LOW RISK MODERATE RISK HIGH RISK Prognostic 16% indicates a moderate risk of decline in kidney function* * as defined by incident diabetic kidney disease (eGFR <60mL/min/1.73m2) in the next four years. Note: If eGFR level at the time of the test is already <60mL/min/1.73m2, then the risk of a further decline in kidney function is defined as an eGFR decline ≥30% in the next four years. Result Interpretation Low Risk Standard diabetes management; Status tested annually. Moderate Risk More frequent monitoring; Optimisation of lifestyle factors; Review of glycemic targets and management; Review of non-glycemic risk factors and their management including blood pressure and lipids; Avoidance of potentially nephrotoxic drugs; Utilisation of therapeutic drugs with evidence of renoprotection; Status tested every 3-6 months. High Risk Very close monitoring; Intensive management strategies based on those for ‘Moderate risk’ above with optimisation of treatments for diabetes and other risk factors. Status tested every 3 months. Interpretation of Risk Scores (based on recommendations from the ADA DKD Consensus report) PREDICTIVE TEST for DIABETIC KIDNEY DISEASE PromarkerD patient reports use a traffic light scoring system for optimal performance A simple blood test that measures three plasma proteins combined with three clinical factors (age, cholesterol, eGFR) In published clinical studies PromarkerD predicted 86% of otherwise healthy diabetics who went on to develop kidney disease within 4 years Definitions: "Promarker" - the proprietary technology used to discover and evaluate proteins for use as diagnostics "PromarkerD/PromarkerD test system" - the patented predictive diagnostic test for Diabetic Kidney Disease "PromarkerD (MS)" - the predictive diagnostic test for Diabetic Kidney Disease using Mass Spectrometry "PromarkerD (IA)" - the predictive diagnostic test for Diabetic Kidney Disease using ImmunoAssay "PromarkerD Hub" - the proprietary software tool used to calculate the risk of Diabetic Kidney Disease in diabetes patients 12 13 Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L P I L L PromarkerD - Clinical CLINICAL RESULTS Effectiveness of PromarkerD confirmed in international study with global pharma A global, multi-centre study of 3,000 people confirmed the effectiveness of PromarkerD as a predictive test for diabetic kidney disease. The collaborative study with Janssen applied the PromarkerD test system to patient samples from the CANVAS completed phase 3 clinical trial of patients with type 2 diabetes. Retrospective analysis of blood samples from the completed clinical trial showed that patients predicted by PromarkerD to be at high-risk of chronic kidney disease were 13.5 times more likely than the low-risk group to develop the disease. The study provides international validation of previous findings that PromarkerD is able to correctly predict a clinically significant decline in kidney function up to four years in advance. The results were presented at the world’s leading diabetes conference, the 80th Scientific Sessions of the American Diabetes Association (ADA), in June. The PromarkerD ‘virtual booth’ at the 80th Scientific Sessions of the American Diabetes Association (ADA) in June. To visit the PromarkerD virtual product display please see: www.PromarkerD.com/product The science behind PromarkerD • PromarkerD was able to predict renal function decline in the four-year CANVAS trial of patients (N>3000) with type 2 diabetes and at high risk of cardiovascular disease. Baseline PromarkerD moderate-risk and high-risk scores were increasingly prognostic for incident CKD (odds ratio 5.29 and 13.52 versus low-risk, respectively; both P<0.001). • PromarkerD was able to predict renal function decline in the four-year Fremantle Diabetes Study of community-based patients (N~1000) with type 2 diabetes. Four-year risk of developing DKD at the optimal score cut-off: 86% sensitivity, 78% specificity (AUC = 0.88), 98% negative predictive value or “rule-out” capability). Across the two clinical studies, 10-28% of patients experienced a clinically significant decline in kidney function during the four years. Long term studies are required to ascertain how current interventions can improve late stage outcomes. Nonetheless current medical understanding is that early intervention and management of chronic kidney disease has long term benefits; existing chronic kidney disease is associated with heart disease, stroke, anaemia, increased levels of infections and lower quality of life; kidney damage is not repairable and if left unchecked provides a permanent significant risk of developing end stage renal disease (ESRD). PromarkerD - Clinical Collaboration Expansion Determining a direct relationship between PromarkerD and patient outcomes is a complex process with extensive data analysis required over the large clinical data set. Janssen and Proteomics International have extended their collaboration to examine the PromarkerD score in patient samples after treatment to assess if patients display an improved prognosis, i.e. does their PromarkerD risk score decrease? Significantly, samples will be tested using the higher throughput PromarkerD immunoassay, PromarkerD (IA), instead of the mass spectrometry platform, PromarkerD (MS). Use of PromarkerD (IA) may provide important results to support Proteomics International's future FDA regulatory applications. In addition to DKD outcomes, the ability of PromarkerD to predict cardiovascular outcomes is also being investigated. Results will be presented during FY21. Journal of Diabetes and Clinical results published in peer-reviewed journal Clinical validation results for PromarkerD were published in the peer-reviewed its Complications in September. In community-based diabetes patients PromarkerD correctly predicted 86 per cent of people who went on to develop chronic kidney disease during the four years of the study. Importantly, the results showed PromarkerD also has an excellent negative predictive value or "rule-out" capability, with the test correctly predicting 98 per cent of people who did not go on to develop diabetic kidney disease within four years. The research was conducted in collaboration with The University of Western Australia Medical School. Treatments for diabetic kidney disease • SGLT2 inhibitors, known as Gliflozins, are a new class of glucose-lowering oral drugs for diabetes • On 30 September 2019, Canagliflozin (Invokana™) became the first drug in 20 years to approved for the treatment diabetic kidney disease • FDA approved SGLT2 inhibitors for type 2 diabetes treatment include: • Empagliflozin (Boehringer Ingelheim/ Eli Lilly & Co.) • Dapagliflozin (AstraZeneca/ Bristol-Myers Squibb) • Canagliflozin (Janssen Pharmaceuticals) • The gliflozins all appear to exhibit renal-protective properties, significantly lowering risk of renal failure, dialysis or kidney transplantation, and renal or cardiovascular death in high-risk patient patients • New guidelines from the American Diabetes Association (Standards of Medical Care in Diabetes 2020) recommend use of SGLT2 inhibitors in type 2 diabetes patients as an additional agent for lowering glucose - and for lowering cardiovascular and renal risk in patients predisposed to these complications. Early detection can significantly help reduce DKD progression and prevent serious kidney damage Potential for PromarkerD as a complementary diagnostic (CDx) • The ability for early identification of at-risk patients who should be prescribed renal-protective drugs now • The monitoring of patients as treatment progresses to show the benefit of that treatment Scientific publications describing PromarkerD Davis TME, Peters KE, Lipscombe R: Apoptosis inhibitor of macrophage (AIM/CD5L) and diabetic kidney disease. Cellular & molecular immunology 2019 May;16(5):521. Peters KE, Davis WA, Ito J, Winfield K, Stoll T, Bringans SD, Lipscombe RJ, and Davis TME (2017). Identification of Novel Circulating Biomarkers Predicting Rapid Decline in Renal Function in Type 2 Diabetes: The Fremantle Diabetes Study Phase II. Diabetes Care 40, 1548-1555. Peters KE, Davis WA, Ito J, Winfield K, Stoll T, Bringans SD, Lipscombe RJ, Davis TME (2017). Novel circulating biomarkers predict rapidly declining renal function in type 2 diabetes: The Fremantle Diabetes Study. Diabetes, 66 (Supplement 1). Bringans SD, Ito J, Stoll T, Winfield K, Phillips M, Peters KE, Davis WA, Davis TME, Lipscombe RJ (2017). Comprehensive mass spectrometry based biomarker discovery and validation platform as applied to diabetic kidney disease. EuPA Open Proteomics 14, 1-10. 14 15 Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L P I L L PromarkerD - Market rP omarke erD P en enta ervot C age T he pa • • ent erivD All pa vots c ed fr ent er use of the t er use of the t om I ts v tn alid un est f tional P tional P ept erna til S til S ember 2031 or diabetic k enta t Applica idney disease (DKD T/A tion PC U2011/001212 U2011/001212 ) unless other ) unless other wise sta .edt ounC Country ytr en entaP pplic Patent/ Application No. .o a tion N t/ A A ustr alia 2 Br azil C anada China 2011305050 2011305050 BR1120130067640 BR1120130067640 2811654 2811654 ZL201180053583.9 ZL201180053583.9 urE ope 2,3 3151012 3151012 Hong K ong 18115912.3 18115912.3 I ndia 3012/DELNP/2013 3012/DELNP/2013 I ndonesia W00 2013 01585 W00 2013 01585 Japan Russia Singapor e USA 2,4 2013-528474 2013-528474 2596486 2596486 188527 188527 US 9,146,243 US 9,146,243 Sta Status tus Sta anGr edtan an anGr ting anGr edtan anGr edtan anGr edtan ending ending P ending ending P anGr edtan anGr edtan anGr edtan anGr edtan anGr edtan alenc 1 Diabetes Prevalence 1 e D alenc iabet es P ver 1,288,300 16,780,800 2,793,500 116,446,900 59,322,100 723,400 77,005,600 10,681,400 7,390,500 8,288,500 640,400 30,987,900 TTo T otal 332,349,300 Total 332,349,300 tn I 1 erna tional Diabet es F eder eder a tion (IDF) A tlas 9th E dition 2019 [ A ge g ge g r oup 20-79 y ears; TTo otal = Diag nosed (48.7%) + Undiag nosed (48.7%) + Undiag nosed (51.3%)]. 2 A ustr applica urE alia, tions bey ope , USA entpa ond DKD ) txet en ended er voco t use of the t est or o ff an fy orm kof idney disease (NB urF ther ther studies re ar equir e vopro ted efficac y y rPof omark erD f or vo C C 3 3 ers F ers F r , Geanc , G erman , Iy , I alyy, taly , Spain, S taly l i urkT urkT ey , and the Unit , and the Unit ed K ed K ingdom, which cumula ingdom, which cumula ingdom, which cumula ingdom, which cumula tiv tiv e 29.6 million adults with diabet ely ha e 29.6 million adults with diabet e 29.6 million adults with diabet ely ha v e 29.6 million adults with diabet .es USA pa 4 ent t fur ther e tx ended t ended t voo c er method f or iden for abnormal k or abnormal k f tifying drugs f idney func rP omark ademark ademark er™ T r ervoC age tion using one of the P tion using one of the P r omark erD biomark ers ( CD5L). echnology pla echnology pla tf orm used t o dev elop P r omark erD can be used t erD can be used t o iden tify unique pr ot ein biomark ein biomark “ers fingerprin ts ”” in an in an y biolog ical sy ical sy st em. alia A ustr A ustr alia Singapor I China I Dominic I I Dominic Dominic I China I Dominic I I USA or ea outh K or e I S I an Republic an Republic I E I E I ur ur ope ope 1 I I I Isr Isr ael ael T he P r omark er™ t ounC Country y tr China Class 44 – M edical diag nostics ser nostics ser I I Me I Japan I Me I Japan I xic xic o o I w Z w Z I w Z Ne I w Z Ne ealand ealand I I Russia I I I Russia I Sta Status tus Sta anGr ed edtan ending ending P vic es (No . 1776917) & Class 5 – Diag . 1776917) & Class 5 – Diag nostic appar a tus f or medical purposes including diag or medical purposes including diag nostics k its (No . 1806616) 1 rT ademark c vo ers all of E ur opean Union, r opean Union, r epr esen ting an additional 29.8 million adults with diabet ting an additional 29.8 million adults with diabet es bey ond the E ond the E ur opean pa .tsent Total Addressable Market The total potential addressable markets for clinical pathology laboratories (it is expected the PromarkerD test may be performed once per year per patient on average (Standard of care: High-risk patients are tested every 3-6 months; Low-risk every 2 years)). a US Patent only 30,987,900 diabetics 1 Trademark only 47,747,700 diabetics 1 Global 462,969,900 diabetics 1 IP Coverage (Patent & Trademark) 272,597,800 diabetics 1 Assumptions: 1 International Diabetes Federation (IDF) Atlas 9th Edition 2019 [Age group 20-79 years; Total = Diagnosed (48.7%) + Undiagnosed (51.3%)]. PromarkerD - Market THE MARKET The International Diabetes Federation estimates there are 463 million adults living with diabetes globally - currently 1 in 3 develop diabetic kidney disease (DKD). At the current rate of growth there will be a 51% increase to 700 million people living with diabetes by 2045. Intellectual Property portfolio expanded Proteomics International continued to strengthen its intellectual property portfolio, in the form of patents, trademarks and trade-secrets, which provide the foundation for licensing discussions. In 2019-20, the Company secured a patent for PromarkerD in Indonesia, which is home to more than 10 million people with diabetes—the sixth highest in the world. Subsequent to the end of the financial year, the company also secured patents for the potentially substantial markets of Brazil, which has 16.8 million adults with diabetes, and Canada, which has 2.8 million. Together the Company's granted patents and trademarks cover 273 million (59%) of the addressable diabetes patient population globally. Business Model for PromarkerD Due to the prevalence of diabetes and diabetic kidney disease the potential revenue from a test for diabetic kidney disease is considerable. Proteomics International is actively pursuing identified global and regional licensing opportunities for PromarkerD across jurisdictions covered by its patents and trademarks and is currently in commercialisation discussions with several different parties. The Company’s business model is to out-license its intellectual property to diagnostics providers and to receive a royalty on each test sold. Proteomics International will also sell the specialist reagents required to perform each test, whilst the PromarkerD hub regulates use of the test by each provider. Under this model the licensee will cover the capital expenditure to distribute and promote PromarkerD within their network, thus removing a significant cost burden from Proteomics International. Proteomics International is targeting a test price to the patient of between US$55 and US$150 (test price of US$55 is based on use of existing American Medical Association CPT billing codes for similar analytes to the PromarkerD panel; test price of US$150 is based on stakeholder engagement responses (Proteomics International market access study conducted by independent US consultant)). Standard industry royalty rates for out-licensing of intellectual property for diagnostics typically range from 5-15%. As part of the global launch for PromarkerD, the Company elected to first license in several smaller geographic jurisdictions, being Mexico (PromarkerD (MS)), Dominican Republic (licence to develop own PromarkerD (IA)) and most recently in Spain (PromarkerD (MS)). However, sales of the test in these jurisdictions are on-hold with clinics and hospitals unable to offer the test due to the COVID-19 pandemic. The launch into these initial jurisdictions has allowed Proteomics International to create brand awareness and prove PromarkerD in real-life clinical settings, both of which are important for future licensing opportunities in larger geographic areas. CANADA UNITED STATES BRITAIN GERMANY FRANCE RUSSIA SPAIN ITALY TURKEY CHINA JAPAN BRAZIL INDIA HONG KONG SINGAPORE INDONESIA AUSTRALIA Countries with PromarkerD patents Countries with PromarkerD patents pending 16 17 Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L P I L L Diagnostics This year Proteomics International has sought to expand its diagnostics (Dx) portfolio by proactively vetting biomarker discovery and diagnostics development opportunities. The Company continues to target new diagnostic tests for chronic diseases with significant unmet need and market opportunity across medicine, veterinary health and agriculture. This led to the expansion of diagnostics R&D pipeline using the PromarkerTM platform. Fully-funded research programs are now in place for endometriosis, the Giardia parasite (the leading cause of infectious gastroenteritis worldwide), chronic lung conditions, cancer, oxidative stress, diabetic retinopathy, plant dieback disease and COVID-19. The PromarkerTM R&D pipeline and typical timeline is as follows: Ethics & governance approval (3 months), Discovery (6 months), Proof of concept (6 months), Clinical studies/Validation (12 months). Diagnostics Endometriosis Status update: Proof-of-concept study completed, clinical studies pending. Patent application filed. In March, Proteomics International announced it had identified and filed a patent application describing a panel of novel protein biomarkers with the potential to be developed into a simple blood test for endometriosis. There is a large market opportunity for Proteomics International given that current tests have low accuracy and cannot easily be used to test if pets infected with Giardia present a risk to their owners. A strain specific test could readily benefit the US market where according to the Centers for Disease Control and Prevention, the prevalence is an estimated 1.2 million people. The proof-of-concept study analysed 54 women across three groups: patients with endometriosis; healthy individuals and, importantly, patients with symptoms but no clinical diagnosis, to identify protein biomarkers that were statistically significant markers for disease. Endometriosis occurs when the tissues that line the uterus spread outside of the uterine cavity and surround other organs. The debilitating disease affects one in nine Australian women, with the current gold standard for detection being a surgical procedure. Direct medical costs (outpatient and hospitalisation) associated with endometriosis in the United States surpass US$17.3 billion annually. Given the large unmet medical need and the only existing diagnostic tool being invasive surgery, Proteomics International believes there will be significant commercial interest in this program post successful clinical study validation. Giardia (causing gastroenteritis) Status update: Proof-of-concept study completed, validation study pending. Proteomics International continues its development of an improved diagnostic test for the parasite Giardia in collaboration with the Murdoch University Veterinary School and a leading US veterinary company. Giardia is a leading cause of infectious gastroenteritis worldwide and one of the most common parasitic human diseases. The risk for human health is that some Giardia strains that affect pets can cross into humans (zoonotic), whilst others do not (host specific). Surveillance data suggests there are 280 million people worldwide being infected each year. Proteomics International has identified strain specific Giardia targets and developed a prototype immunoassay, which is pending validation using field samples. This aspect has been delayed by the COVID-19 pandemic. The commercial viability of the assay will not be known until completion of this last phase, which is expected later in 2020. Asthma & COPD Status update: Ethics approval received, discovery study underway. Proteomics International received ethics approval for a discovery study to identify biomarkers for asthma and chronic obstructive pulmonary disease, which cost healthcare systems tens of billions of dollars a year. The study is in collaboration with the Busselton Population Medical Research Institute, which gives Proteomics International access to the globally-recognised Busselton Health Study, first established in 1966 and one of the longest running epidemiological research programs in the world. The discovery phase has recently commenced using the PromarkerTM pipeline. Plant dieback Status update: Discovery study underway. The Company's approach to developing diagnostic tests and identifying potential drug targets is not limited to human medicine. Proteomics International has an ongoing collaboration with the Centre for Crop and Disease Management at Curtin University to target the plant pathogen Phytophthora cinnamomi, which is responsible for plant dieback. The pathogen has already infected over one million hectares of Australian bushland, and also infects premium crops such avocados, macadamias and pineapples. Phytophthora attacks the roots of vegetation and inhibits them from being able to take up water and nutrients, resulting in death (termed Dieback). The estimated cost to the Australian economy is $160 million per year for damage to natural vegetation alone. Current investigations are focused on proteomic analysis (determining the protein maps) of the life stages of the organism and how it infects its host. This has the potential to identify weaknesses in the pathogen that could be targeted to help eradicate this disease. 18 19 Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L P I L L Diagnostics Eye disease (retinopathy) Cardiovascular disease Pregnancy complications Oral health Kidney disease (nephropathy) Nerve damage (neuropathy) Diabetic foot Complications of diabetes. Diabetic retinopathy Status update: Ethics approval received, discovery study underway. Following the success of its diabetic kidney disease project, Proteomics International signed a new collaboration agreement with The University of Western Australia to seek early markers for diabetic retinopathy. Diabetes adversely affects the body's blood vessels leading to a range of complications including heart (cardiovascular), kidney (nephropathy), nerve (neuropathy) and eye (retinopathy) damage. Currently a third of patients with diabetes have diabetic retinopathy - vision impairment caused by damage to blood vessels at the back of the eye. Diabetic retinopathy is the major cause of blindness in the USA, responsible for approximately 20,000 new cases each year, but finding and treating diabetic retinopathy early can reduce the risk of blindness by 95%. An early diagnosis has the ability to transform quality of life outcomes, with commensurate billion-dollar socioeconomic benefits. This collaboration is applying the PromarkerTM platform to look for prognostic markers in the blood that can identify patients at risk of retinopathy, especially sight-threatening retinopathy. The program will again utilise the Fremantle Diabetes Study which provided the rich sample repository that led to PromarkerD. in a Oxidative stress (2-tag) Status update: Status update: Proof-of-concept study completed, clinical validation pending. Commercialisation discussions underway. Proteomics International has been long-term collaboration with The University of Western Australia to develop methodology that could become the next generation of medical diagnostic tests. The patented technology called "2-tag" measures the oxidative stress in a system. Every person has a base level of oxidative stress at all times - the human body requires oxidative stress to function. However, very high levels of oxidative stress can be dangerous and have been linked to a wide range of chronic diseases including stroke, heart attack, Parkinson’s disease, and muscular dystrophy and muscle damage. 2-tag extends Proteomics International's existing technology platform to zoom further into the molecular landscape to examine not only the number and type of proteins in a sample but subtle “decorations” on the proteins themselves. The technology has now matured with the 2-tag test demonstrating proof of concept with several publications targeting Duchenne muscular dystrophy and new exploratory work in aquaculture and sports management. The Company's intellectual property consists of granted patents in the USA (US 8,043,824 B2) and Australia (AU2006/001757) directed to a "Method to determine the redox {oxidation} state of proteins ('2-tag')". Proteomics International is currently examining commercial opportunities to exploit this innovative technology. Diagnostics Biomarkers for cancer Status update: Proof-of-concept study completed, clinical validation pending. In-licensing discussions underway. Proteomics International is in discussion with a pre- eminent Australian medical research institute to in-license a novel mass spectrometry-based cancer diagnostic test. The Company will provide further details as this develops. Novel disease biomarkers - ARC Centre for Personalised Therapeutics Technologies Status update: Ethics approval received, discovery study underway. In-licensing discussions underway. The Australian Research Council Centre for Personalised Therapeutics Technologies is a $3.1 million Federally funded Industrial Transformation Training Centre (ITTC) in which Proteomics International is working alongside leading university-based researchers to apply the PromarkerTM technology to Complementary Diagnostics. Proteomics International is in advanced discussion with other consortium members for a discovery project in an area of significant unmet medical need. The Company will provide further details as this develops. COVID-19 biomarkers Status update: Ethics approval pending, method development underway prior to the discovery study. The program is for the identification of protein biomarkers for COVID-19 disease susceptibility and response. According to the World Health Organisation, 80% of people with COVID-19 disease have no symptoms or just a mild infection, whereas 14% of infections are severe and require oxygen and 6% are critical infections requiring ventilation. The difference could be due to protein 'fingerprints' in the patient's blood. These biomarkers have the potential to become a simple blood test that predicts which patients are at greatest risk of requiring significant medical intervention. Proteomics International has teamed up with respiratory physicians to analyse collections of blood samples taken from patients at diagnosis to (a) identify whether there are biomarkers in mild COVID-19 patients that are protective in that individual, and (b) determine if there are biomarkers that predict a severe or critical infection. The identification of such biomarkers could provide a new diagnostic test for clinicians to triage patients when they present with first diagnosis, enabling better planning and allocation of limited hospital resources. This is an area of significant unmet need in global COVID-19 diagnostics. COVID-19 diagnostic Status update: Ethics approval received, discovery study underway. The second program is for research into the development of a rapid, non-invasive diagnostic test for direct detection of the SARS-CoV-2 virus in patients. The new diagnostic test is targeting detection of the virus in saliva because it is easy to collect and analyse. The successful development of a new diagnostic test for infections due to COVID-19 could provide a significant improvement in testing capabilities nationally and worldwide. In May, Proteomics International was awarded two grants worth a combined $200,000 under the Western Australian COVID-19 Research Grants Program to support these two projects. Cutting-edge protein biomarker analysis facility launched Proteomics International joined forces with Bioplatforms Australia and The University of Western Australia to launch a cutting-edge proteomics facility to explore biological markers affecting medicine, agriculture, the environment and marine world. With Federal and State Government support this Public Private Partnership is coinvesting A$4.4m over the next four years in the expanded Western Australian Proteomics Facility. Equipment for the cutting-edge facility was installed in December and has already provided an increased ability to explore for and identify biological markers across a broad range of sectors. This enhanced capability could lead to the identification of new drug targets and the creation of diagnostic tests across medicine and agriculture, boosting both Proteomics International's R&D activities and analytical services. 20 21 Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L P I L L Analytical Services Revenue from analytical services remained robust, showing only a temporary dip due to the COVID-19 pandemic. This year revenue was spread across specialist analytical work (e.g. food product quality control), consulting services, provision of external biomarker analysis services, and biosimilars and pharmacokinetic (PK) testing. its world Biosimilars analytical service extended Proteomics International has specialised in the analysis of biosimilars (generic protein drugs) since the Company received laboratory leading accreditation In November, Proteomics International experienced a successful audit by NATA (National Association of Testing Authorities, Australia), which emphasised the high quality of analytical processes within the Company's facilities. Proteomics International ISO 17025 in 2009. also took advantage of the downtime associated with its equipment upgrade to develop and launch a new specialist service for glycan analysis of biosimilars. This is an important addition to the Company's portfolio of services that are used to assess the quality of a biosimilar product, with the use of biosimilar drugs in the treatment of cancers continuing to expand. New pharmacokinetic analysis contracts secured Proteomics International expanded its partnership with Linear Clinical Research, securing new analytical services contracts during the year. The revenue from Proteomics International’s specialist analytical services continues to support the development and commercialisation of the Company’s pioneering diagnostic tests. World’s most accredited protein testing laboratory Proteomics International was the first laboratory in the world to receive ISO/IEC accreditation for proteomics services in 2009 (Accreditation number:16838). Proteomics International now holds multiple levels of internationally recognised accreditation: • • ISO 17025: 2015 – R&D with Good Laboratory Practice (GLP) overlay ISO 17025: 2015 – Chemical Testing Accreditation recognises Proteomics International's ability to consistently achieve technically valid, traceable and reproducible results. In Australia, accreditation is assessed by NATA (the National Association of Testing Authorities). ISO/IEC 17025 is recognised worldwide as the main ISO standard used by testing and calibration laboratories, and is the most widely used laboratory standard for US Federal testing laboratories. Accreditation means that clients and regulatory authorities can have confidence in test results and helps companies identify reliable service providers. Proteomics International enters Export Award Hall of Fame In recognition of winning the Health & Biotechnology Export Award in 2015, 2016, and 2018, as well as the Western Australian Exporter of the Year Award in 2016, Proteomics International was inducted into the WA Industry & Export Awards Hall of Fame. The induction recognises continued export success and exemplifies the global breadth of the company's client base. Company Operations DRUG DISCOVERY Proteomics International has had a long-standing interest in innovative drug discovery, with the Company's first substantial external funding received to develop a novel therapeutic pipeline in 2008. This pipeline became the basis for the PromarkerTM technology platform. The drug discovery program is on hold whilst the company focuses its resources on the commercialisation of PromarkerD, diagnostics, and the provision of analytical services. CORPORATE ACTIVITY In November, Proteomics International raised $3.0 million (before costs) through the issue of 10.8 million shares in a heavy-oversubscribed share placement. The placement was at an issue price of $0.28 per share, and was supported by institutional, sophisticated and professional investors. The funds were used for the upgrade to the Company's laboratory capabilities, to support development of existing and potentially new intellectual property, and to pursue regulatory and the commercialisation of PromarkerD. reimbursement approvals for STRATEGIC COLLABORATIONS Proteomics International continues to work closely with the biotechnology and life science community across Australia. the development of scientific knowledge and help Proteomics International realise its scientific and business objectives. collaborations promote Strategic Highlights of the Company’s collaborations include: Harry Perkins Institute of Medical Research (Perkins) The Perkins is the premier adult medical research institute in Western Australia. Proteomics is headquartered there and has held close ties with the Perkins since 2006. The Company has extended and expanded its lease with the Perkins to ensure that Proteomics International's facilities continue to meet its needs as the company grows. International Bioplatforms Australia (BPA) BPA is a federal body instigated as part of the National Collaborative Research Infrastructure Scheme (NCRIS) to facilitate a national capability in the 'omics sciences (genomics, proteomics, metabolomics and bioinformatics). Proteomics International manages the Western Australian node of Proteomics Australia and this year expanded this Public Private Partnership (see Diagnostics 'Cutting-edge protein biomarker analysis facility opens'). Australian Research Council Training Centre for Personalised Therapeutics Technologies This national $3.1 million Industrial Transformation Training Centre (ITTC) sees Proteomics International work with university-based researchers to provide industry training through the application of the PromarkerTM technology to Complementary Diagnostics. The centre is hosted by the University of Western Australia, Monash University and the University of Melbourne. A joint diagnostics project is now underway (see 'Diagnostics - Novel disease biomarkers'). Accelerating Australia This organisation has developed a cohesive and collaborative early stage biomedical translation ecosystem under the umbrella of a national consortium covering academia, industry, and health care providers, including MTP Connect (the Medtech and Pharma Growth Centre). As a commercial partner, Proteomics International enjoys early access to new ideas and products. Accelerating Australia is led by the Centre for Entrepreneurial Research and Innovation based in Western Australia. The Centre’s activities are on-going. Dr Bill Parker Memorial Industrial Scholarship In 2017, the Company launched the Dr Bill Parker Memorial Industrial Scholarship in memory of its cofounder. The inaugural winner completed a one-year placement with the company in 2018, and is currently undertaking an undergraduate degree. The program is on-going and Proteomics International looks forward to supporting the 2020 class of budding life scientists. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS In the opinion of the Directors, there were no significant changes in the state of affairs of the Group that occurred during the financial year not otherwise disclosed in this report and the financial statements. EVENTS SINCE THE END OF THE FINANCIAL YEAR On 27 July 2020, Proteomics International announced that the Company has secured patents for PromarkerD for the potentially substantial markets of Brazil, which has 16.8 million adults with diabetes, and Canada, which has 2.8 million. Together the Company's granted patents and trademarks cover 273 million (59%) of the addressable diabetes patient population globally. 22 23 P I L L Company Operations Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L Board of Directors and Operational Team BOARD OF DIRECTORS Terry Sweet – Non-Executive Chairman (Independent) Richard Lipscombe – Managing Director Roger Moore - Non-Executive Director (Independent) Paul House - Non-Executive Director (Independent) INFORMATION ON DIRECTORS Director Experience Mr Terry Sweet FAICD Terry has been a Director of several listed companies over the past 30 years in both executive and non-executive capacities. These companies include XRF Scientific Ltd, where he was Managing Director for 4 years, Western Biotechnology Ltd, Heartlink Ltd, and Scientific Services Ltd. Originally trained as a chemist, his interests and expertise now lie in the area of development and supervision of a culture of Board integrity, commensurate with technology commercialisation. Terry is a Fellow of the Australian Institute of Company Directors and joined the Board in June 2014. Dr Richard Lipscombe PhD (London), MA (Oxford) Mr Roger Moore R (Denmark), BPharm (U. Syd) Mr Paul House GAICD, BCom (UWA) Richard, a co-founder of the Company, is a highly practised business manager and protein chemist expert in analysing biomolecules using proteomics techniques. He has an extensive expertise in chemistry, immunology, mass spectrometry, peptide synthesis, high performance computing and robotics. Richard has international experience in both science and business gained over a 30-year period in Australia, USA and the UK, including work in hospital and academic laboratories and commercial organisations. He completed his chemistry degree (MA) at Oxford University, his PhD in immunology at London University and was a Post-Doctoral scientist (molecular immunology) in a large research institution in Australia (Telethon Kids Institute). After managing the Protein Analysis Facility at the University of Western Australia, he co-founded Proteomics International Pty Ltd in 2001. Richard is well published in peer review journals, and holder of several patents. Roger has 40 years’ experience in the international pharmaceutical industry, including almost 30 years as President of Novo Nordisk Japan (Novo Nordisk is the world's largest manufacturer of insulin and a global leader in diabetes care). Roger established Novo's organisation in Japan as the first employee in 1977, and worked for the company until his retirement as Chairman at the end of 2007. From 2000, Roger was appointed Senior Vice President, Japan and Oceania Region, responsible for Novo Nordisk's business in Japan, Australia, New Zealand and the Pacific. He was also appointed a member of the Senior Management Board, Novo Nordisk A/S. In 2007 Mr Moore was awarded the Knight's Cross of the Order of the Dannebrog (R) by Queen Margrethe II of Denmark. Roger joined the Board in October 2016. Paul has over 25 years’ experience with multi-national corporations and is currently CEO of Imdex (ASX:IMD). He recently served eight years as the Managing Director of SGS India, where he was responsible for a workforce of 4,500 personnel and 38 laboratories; SGS is the world’s leading Testing, Inspection and Certification (TIC) company. Previously held CFO and COO roles and has a track record for delivery of business performance targets, revenue growth, margin improvement, market share and productivity, across multiple services, markets and borders. A Fellow of the Australian Institute of Management and a Graduate Member of Australian Institute of Company Directors, Paul joined the Board in November 2017. Special Responsibilities Particulars of Director’s interest in securities of the Company Shares Options Chairman 2,348,000 400,000 Managing Director 19,048,705 - Nil 717,000 200,000 Nil 718,864 200,000 LIKELY DEVELOPMENTS Proteomics International will continue to pursue the commercialisation of its lead diagnostic test PromarkerD in global markets. Potential licence partners are global and regional diagnostic companies, diagnostic service providers, and drug developers. In jurisdictions where licences have already been granted, the focus will be on increasing the adoption of the test by engaging with Key Opinion Leaders and the broader network of clinical service providers. As for any novel test, market penetration cannot be predicted accurately, hence for each licence it is not possible to quantify the financial impact on Proteomics International in any given timeframe. Nonetheless, PromarkerD has the potential to spare millions of people from the cost of dialysis, saving each health care system billions of dollars. Consequently, the Company believes that ultimately the financial impact of each licence will be significant. The development pipeline for new diagnostic tests will progress using the PromarkerTM technology platform, with the intention of creating new intellectual property that can be licensed in future years. These R&D and commercialisation activities will continue to be underpinned by the analytical services operations. Fee-for-service revenue continues to grow and Proteomics International anticipates further growth. ENVIRONMENTAL REGULATIONS The Company is subject to environmental regulation and other licences in connection with its research and development activities utilising the facilities at the Harry Perkins Institute of Medical Research. The Company complies with all relevant Federal, State and Local environmental regulations. The Board is not aware of any breach of applicable environmental regulations by the Company. GREENHOUSE GAS AND ENERGY DATA REPORTING The Company has assessed the reporting requirements of both the Energy Efficiency Opportunities Act 2006 and the National Greenhouse and Energy Reporting Act 2007 and the Group is not currently subject to any reporting obligations. GOVERNANCE The Board of Directors is responsible for the operational and financial performance of the Company, including its corporate governance. The Company believes that the adoption of good corporate governance adds value to investor confidence. stakeholders and enhances governance Proteomics statement is available on the Company’s website, in a section titled ‘Corporate Governance’. International’s corporate 24 25 P I L L P I L L CURRENT AND FORMER DIRECTORSHIPS Directors’ Name Current Directorships Former Directorships (last 3 years) OPERATIONAL TEAM Proteomics International has established and maintained a highly qualified, multilingual team with well-balanced commercial and scientific expertise. The senior management group comprises: Terry Sweet Richard Lipscombe Roger Moore Paul House Nil Nil Nil Nil Nil Nil Nil Nil COMPANY SECRETARY Ms Karen Logan BCom, Grad Dip AppCorpGov, FCIS, FGIA, F Fin, GAICD Karen Logan is a Chartered Secretary with over 15 years’ experience in assisting small to medium capitalised ASX-listed and unlisted companies with compliance, governance, financial reporting, capital raising, merger and acquisition, and IPO matters. She is presently the principal of a consulting firm and secretary of a number of ASX-listed companies, providing corporate and accounting services to those clients. MEETINGS OF DIRECTORS The numbers of meetings of the Company’s Board of Directors held during the year ended 30 June 2020, and the numbers of meetings attended by each Director were: Directors Mr Terry Sweet Dr Richard Lipscombe Mr Ian Roger Moore Mr Paul House Full Meetings of Directors A B 11 11 11 11 11 11 11 10 A = Number of meetings attended B = Number of meetings held during the time the Director held office The Board meets regularly on an informal basis in addition to the above meetings. Directors have determined that the Company is not of sufficient size to merit the establishing of separate sub-committees and all decisions are made by the full Board. Head of Business Development John C. Morrison John has over 35 years’ experience in life sciences, biotechnology, and diagnostic industries. John has a degree in chemistry and an MBA from Boston University. He has held several management positions while at NEN Life Sciences and DuPont before focusing his last 15 years in Business Development at Perkin Elmer. John successfully executed many licensing deals and several global acquisitions while in that role. John is based in Massachusetts, USA and joined the Company in 2014. General Manager Dr Kerryn Garrett Kerryn is responsible for overseeing the day-to-day operations of the Company as well as ensuring that operations are in line with the strategic direction of the Company. Kerryn joined Proteomics International in 2019, and previously held the role of Laboratory Manager. Kerryn has over 30 years of research experience, and brings a key set of expert skills from her extensive experience in the diagnostic pathology industry and the regulatory elements of accreditation agency NATA. Research Manager Dr Scott Bringans Scott has over 20 years’ experience in protein chemistry and mass spectrometry, and leads the diagnostics program encompassing PromarkerD. Alongside this is the development of novel methodology to add to Proteomics International's technology platform and continually expanding the fee-for-service and quality testing portfolio. Scott has been with the Company for 14 years. Business Manager - PromarkerD Dr Pearl Tan Pearl is focused on leading the team commercialising PromarkerD. She has been with Proteomics International since 2013, and her previous roles include Chief Operating Officer of Proteomics International and leading the commercialisation of the patented 2-tag technology (used to measure oxidative stress). Pearl has a background in research and completed her PhD in Biochemistry and Molecular Biology at The University of Western Australia. Business Manager - Analytical Services Dr Javed Khan Javed has international commercial experience gained over 10 years in the life sciences industry. With a PhD in Chemistry and Biomolecular Sciences from Macquarie University, Javed joined Proteomics International as a computational proteomics specialist in 2013, before transitioning into Project Management/Business Development and was recently appointed Manager of the Company’s extensive Analytical Services business and portfolio. 26 27 P I L L Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L Material Business Risks The Group has identified the below specific risks that could impact upon its future prospects. Commercialisation Risk The Company is relying on its ability and that of its partners to develop and commercialise its products and services in order to create revenue. Any products or services developed by the Company will require extensive clinical testing, regulatory approval and significant marketing efforts before they can be sold and generate revenue. The Company’s efforts to generate revenue may not succeed for a number of reasons including issues or delays in the development, testing, regulatory approval or marketing of these products or services. In addition, developing direct sales, distribution and marketing capabilities will require the devotion of significant resources and require the Company to ensure compliance with all legal and regulatory requirements for sales, marketing and distribution. A failure to successfully develop and commercialise these products and services could lead to a loss of opportunities and adversely impact on the Company’s operating results and financial position. In addition, for those countries where the Company may commercialise its products or services through distributors or other third parties, the Company will rely heavily on the ability of its partners to effectively market and sell its products and services. Further, even if the Company does achieve market commercialisation of any of its products and services, it may not be able to sustain it or otherwise achieve commercialisation to a degree that would support the ongoing viability of its operations. Drug Market Risk The research and development process typically takes from 10 to 15 years from discovery to commercial product launch. This process is conducted in various stages in order to test, along with other features, the effectiveness and safety of a product. There can be no assurance that any of these products and services will be proven safe or effective. Accordingly, there is a risk at each stage of development that the Company will not achieve the goals of safety and/or effectiveness and that the Company will have to abandon a product. Intellectual Property The following are considered to be risks to the Company’s intellectual property: (i) General The patent protection that the Company may obtain varies from product to product and country to country and may not be sufficient, including maintaining product exclusivity. Patent rights are also limited in time and do not always provide effective protection for products and services: competitors may successfully avoid patents through design innovation, the Company may not hold sufficient evidence of infringement to bring suit, or the infringement claim may not result in a decision that the rights are valid, enforceable or infringed. Legislation or regulatory actions subsequent to the filing date of a patent application may affect what an applicant is entitled to claim in a pending application and may also affect whether a granted patent can be enforced in certain circumstances. Laws relating to biotechnology remain the subject of ongoing political controversy in some countries. The risk of changed laws affecting patent rights is generally considered greater for the biotechnology field than in other longer established fields. (ii) Entitlement to Priority In order for material disclosed in a patent application to be entitled to the priority date of a corresponding earlier filed application (e.g. a provisional application), there must be adequate support or disclosure of such material in the in a patent provisional application. Subject matter application that is not so disclosed in the earlier application is not entitled to the claim to priority, which may affect patentability of the subject invention, or the validity of any patent that may be granted. (iii) Securing a Patent The claims in a pending application cannot be considered predictive of claims in a granted patent. Examination in certain jurisdictions such as the USA and the European Patent Office are often more stringent than other countries and all pending claims may be subject to amendment during the pendency of an application. Thus, during pendency of any patent application, an applicant cannot reliably predict whether any claims will ultimately be granted or what the scope of any granted claims will be. Furthermore, whilst the scope of claims granted in one country may assist, it cannot be relied upon for predicting the scope of claims granted in another country. All patent searches are dependent on the accuracy and scope of the databases used for the search and, in particular, the manner in which information in the databases is indexed for searching purposes. Patent applications may have been filed by third parties based on an earlier priority date and the existence of such applications may not be known for up to about 18 months after they were filed. Such earlier-filed applications may constitute prior art that adversely affects patentability or claim scope of a patent matter listed herein. Given the timing of and the approach taken to the examination of patent applications, if any prior art in this 18-month period does exist, it is unlikely that it will be located in searches conducted by official Patent Offices. Delays may occur during pendency, due to unpredictable events that the application cannot control. The net effect of such delays may be to decrease the time from the date of patent grant to the end of the patent term and thus adversely affect the effective lifetime of enforceability of the patent. Patents and pending applications can be subject to opposition or other revocation proceedings, that vary from country to country, and which cannot be predicted in advance. Reliance on Key Personnel The Company’s ability to operate successfully and manage its potential future growth depends significantly upon its ability to attract, retain and motivate highly-skilled and qualified research, technical, clinical, regulatory, sales, marketing, managerial and financial personnel. The competition for qualified employees in the life science industry is intense and there are a limited number of persons with the necessary skills and experience. The Company’s performance is substantially dependent on Dr Lipscombe and the other members of its senior management and key technical staff to continue to develop and manage the Company’s operations. The loss of or the inability to recruit and retain high-calibre staff could have a material adverse effect on the Company. The Company also relies on the technical and management abilities of certain key Directors and employees, consultants and scientific advisers. The loss of any of these Directors, employees, consultants or scientific advisers could have an adverse effect on the business and its prospects. Regulatory Risk The introduction of new legislation or amendments to existing legislation by governments, developments in existing common law, or the respective interpretation of the legal requirements in any of the legal jurisdictions that govern the Company’s operations or contractual obligations, could impact adversely on the assets, operations and, ultimately, the financial performance of the Company and its shares. In addition, there is a risk that legal action may be taken against the Company in relation to commercial matters. Funding Risk While the Company believes it will have sufficient funds to meet its operational requirements for the next 12 months, the Company may in the future seek to exploit opportunities of a kind that will require it to raise additional capital from equity or debt sources, joint ventures, collaborations with other life science companies, licensing arrangements, production sharing arrangements or other means. The Company’s capital requirements depend on numerous factors and, having regard to the early stage of development and the nature of its products and services, the Company is currently unable to precisely predict if, and what amount of, additional funds may be required. Factors, which may influence the Company’s possible need for further capital, include such matters as: • • • • the costs and timing of seeking and obtaining regulatory approvals; the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; the effects of competing product, clinical, technological and market developments; and the terms, timing and consideration, if any, of collaborative arrangements or licensing of products and services; There can be no assurance that additional finance will be available when needed or, if available, the terms of the financing might not be favourable to the Company and might involve substantial dilution to Shareholders. If the Company is unable to obtain additional financing as needed, it may be required to reduce the scope of its operations and scale back development and research programmes as the case may be. Insurance Risk The Company may not be able to maintain insurance for service liability on reasonable terms in the future and, in addition, the Company's insurance may not be sufficient to cover large claims, or the insurer could disclaim coverage on claims. If the Company fails to meet its clients' expectations, the Company's reputation could suffer and it could be liable for damages. The Company gives no assurance that all such risks will be adequately managed through its insurance policies to ensure that catastrophic loss does not have an adverse effect on its performance. Exchange Rate Risk The Company is exposed to movements in foreign exchange rates. The Company does not hedge against movements in the exchange rate. However, significant changes in currencies may impact on the Company’s margins and earnings adversely. Dependence on Key Relationships The Company strategic business currently has relationships with other organisations that it relies upon for key parts of its business, such as obtaining the use of the mass spectrometers, chromatography systems and other equipment important to the Company’s activities. The loss or impairment of any of these relationships could have a material adverse effect on the Company’s results of operations, financial condition and prospects, at least until alternative arrangements can be implemented. In some instances, however, alternative arrangements may not be available or may be less financially advantageous than the current arrangements. 28 29 Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L P I L L Remuneration Report REMUNERATION REPORT (Audited) The Remuneration Report is set out under the following main headings: A B C D E F G H Principles Used to Determine the Nature and Amount of Remuneration Remuneration Governance Details of Remuneration Directors' Agreements Share-Based Compensation Additional Information Additional disclosure relating to key management personnel Transactions with the key management personnel The information provided in this Remuneration Report has been audited as required by Section 308(3C) of the Corporations Act 2001. The remuneration arrangements detailed in this report are for Non-Executive and Executive Directors as follows: (cid:891) Mr Terry Sweet Non-Executive Chairman (independent) (cid:891) Dr Richard Lipscombe Managing Director (cid:891) Mr Ian Roger Moore Non-Executive Director (independent) (cid:891) Mr Paul House Non-Executive Director (independent) The Board members above make up the total number of key management personnel for the purpose of this report. REMUNERATION REPORT (continued) A. Principles Used to Determine the Nature and Amount of Remuneration The objective of the Company's remuneration framework is to ensure reward for performance is competitive and appropriate for the results delivered and set to attract the most qualified and experienced candidates. Remuneration levels are competitively set to attract the most qualified and experienced directors in the context of prevailing market conditions. The directors recognise that in the early stages of the Company's development and in a period where the Company is making losses the objectives are to align the interests of the Board with shareholders and to attract, motivate and retain high performing individuals. The Board believes that this can be achieved through the following framework: (cid:891) (cid:891) The remuneration has a mix of components through the salary and share options; and The remuneration has been set in consultation with key management personnel (other than the relevant director whose remuneration is being discussed) taking into account the size of the Company and its current position in the market. The Company has not obtained independent advice on the remuneration policies and practices of the key management personnel or sought the assistance of an external consultant on the current market for similar roles, level of responsibility and performance of the Board. The Board may consider this in the future should the need arise. Non-Executive Directors Fees and payments to the Non-Executive Directors reflect the demands which are made on and the responsibilities of the Directors. The Non-Executive Directors' fees and payments are expected to be reviewed annually by the Board. The Non- Executive Chairman's fees are determined based on competitive roles in the external market. The Chairman is not present at any discussions relating to the determination of his own remuneration. The Non-Executive Directors' fees and payments have been set based on the experience of the director in the Company's field of operations, and level of activity required to be undertaken by the director in the management of the Company. The Chairman currently received a fixed fee for his services as a Director. The Company's Non-Executive Directors' remuneration package contains the following key elements: (cid:891) primary benefits - monthly director's fees; and (cid:891) options - issued following shareholder approval at the 2018 Annual General Meeting. The Non-Executive Directors' fees are determined within an aggregate directors' fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $500,000 per annum and was approved by shareholders prior to listing on the ASX. No retirement benefits are provided other than compulsory superannuation. Non-Executive Remuneration Mix The following table sets out the non-executives' remuneration mix for the year ended 30 June 2020: Fixed $ 135,405 "At Risk" $ - Total $ 135,405 30 31 P I L L Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd REMUNERATION REPORT (continued) REMUNERATION REPORT (continued) Executive Director The Company's Executive Director remuneration package contains the following key element: (cid:891) primary benefits - salary via an agreement The above component comprises the Executive Director's total remuneration. Executive Remuneration Mix The following table sets out the executives' remuneration mix: Fixed $ 299,231 "At Risk" $ Total $ - 299,231 The shareholders approved the Director Fee Plan at the 2018 Annual General Meeting, where (subject to shareholder approval) director fees can be settled by the issue of shares. CONSOLIDATED ENTITY PERFORMANCE AND LINK TO REMUNERATION Given the nature, size and scale of the Company and its current position with regard to profitability and share price, the Board has determined that a direct link between remuneration and the Company's performance is difficult to achieve and not realistic. USE OF REMUNERATION CONSULTANTS The Company has not engaged a remuneration consultant during the year. VOTING AND COMMENTS MADE AT THE COMPANY'S ANNUAL GENERAL MEETING At the 2019 Annual General Meeting, more than 75% of votes cast were in favour of adoption of the (cid:18)(cid:381)(cid:373)(cid:393)(cid:258)(cid:374)(cid:455)(cid:859)(cid:400) remuneration report for the 2019 financial year. The Company did not receive any comments at the Annual General Meeting on its remuneration report. TOTAL (i) (ii) B. Remuneration Governance The Board is primarily responsible for making decisions and recommendations on: (cid:891) the over-arching executive remuneration framework; (cid:891) the operation of the incentive plans which apply to the executive director and non-executives including the performance hurdles; (cid:891) the remuneration levels of executives; and (cid:891) Non-Executive Director fees. P I L L Percentage Remuneration Consisting of Options Performance Related % % C. Details of Remuneration Details of the remuneration of the Directors of the Company is set out below: Short-Term Benefits Post- Employment Benefits Other Long-Term Benefits Share Based Benefits Directors Fees Salary Superannuation Annual Leave Options $ $ $ $ $ 54,000 36,000 36,000 - - - - 250,000 126,000 250,000 5,130 3,420 855 23,749 33,154 - - - 25,482 25,482 - - - - - Total $ 59,130 39,420 36,855 299,231 434,636 0% 0% 0% 0% 0% $ $ $ $ $ $ % % 54,000 14,285 36,000 48,630 - - - - - 185,000 152,915 185,000 5,130 1,357 3,420 3,420 17,575 30,902 - - - - 89,531 148,661 - 44,765 44,766 15,642 84,185 96,816 4,569 4,569 - 207,144 179,062 552,448 60% - 53% 46% - 32% 0% 0% 0% 0% 0% 60% - 53% 46% - 32% 2020 Non-Executive Directors Terry Sweet Ian Roger Moore Paul House (ii) Executive Director Richard Lipscombe TOTAL 2019 Non-Executive Directors Terry Sweet John Dunlop (i) Ian Roger Moore Paul House (ii) Executive Director Richard Lipscombe Resigned 22 November 2018. Fees include settlement of liability with shares in lieu of cash as per Director Fee Plan. 32 33 Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L P I L L REMUNERATION REPORT (continued) D. Directors' Agreements On appointment, the Non-Executive Directors sign a letter of appointment with the Company which outlines the Board's policies and terms regarding their appointment including the remuneration relevant to the office of director. A Summary of each Director's terms is listed below: Mr Terry Sweet (Chairman) Particulars Terms Term of the agreement No fixed term - subject to periodic re-election at the AGM Base remuneration $54,000 Superannuation Bonus payable Statutory rate N/A Termination of agreement None specified Mr Ian Roger Moore (Non-Executive Director) Particulars Terms Term of the agreement No fixed term - subject to periodic re-election at the AGM Base remuneration $36,000 Superannuation Bonus payable Statutory rate N/A Termination of agreement None specified Mr Paul House (Non-Executive Director) Particulars Terms Term of the agreement No fixed term - subject to periodic re-election at the AGM Base remuneration $36,000 Superannuation Bonus payable Statutory rate N/A Termination of agreement None specified Remuneration and other terms of employment for the Executive Directors are formalised in services agreements. The major provisions relating to remuneration are set out below. Dr Richard Lipscombe (Managing Director) Particulars Terms Term of the agreement No fixed term Base remuneration Superannuation Bonus payable Leave entitlements Termination of agreement $250,000 Statutory rate At the absolute discretion of the Board 30 days annual leave and no long-service leave 1 month (incapacitated / ill / unsound mind), 1 month (serious or persistent breaches), immediate (conviction / major criminal offence) Other Long Term Benefits No other long term benefits are payable. REMUNERATION REPORT (continued) E. Share-based Compensation At the 2018 Annual General Meeting it was agreed to issue options to the non-executive directors as follows: Director Number of Options Grant Date Expiry Date Exercise Price Fair Value at Grant Date (i) Terry Sweet Total Ian Roger Moore Total Paul House Total 200,000 200,000 400,000 100,000 100,000 200,000 100,000 100,000 200,000 22-Nov-18 22-Nov-18 22-Nov-21 22-Nov-22 22-Nov-18 22-Nov-18 22-Nov-21 22-Nov-22 22-Nov-18 22-Nov-18 22-Nov-21 22-Nov-22 (i) The options were issued as a reward and incentive and vested immediately. $ 0.50 0.67 0.50 0.67 0.50 0.67 $ 44,206 45,325 89,531 22,103 22,662 44,765 22,103 22,663 44,766 F. Additional Information While earning and shares price movements are not linked to remuneration, the performance of the Company over the year ended 30 June 2020 is summarised below (note that EBITDA and non-cash calculations are not in strict compliance with AIFRS as the loss for the period is adjusted for tax, interest, depreciation, and the non-cash items fair value movement in derivatives and share based payments expense): Total income EBITDA and non-cash EBIT (Loss) after tax 2020 $ 3,016,274 ( 1,248,535) ( 1,724,958) ( 1,743,770) The factors that are considered to affect total shareholder return ('TSR') are summarised below: Share price at listing date ($A) Share price at financial year end ($A) Total dividends declared (cents per share) Basic loss per share (cents per share) 2016 $ 2017 $ 2018 $ 2019 $ 2020 $ 0.20 0.20 0.20 0.20 0.20 0.27 0.16 0.20 0.35 0.42 ( 0.03) - ( 0.02) - ( 0.02) - ( 0.03) - ( 0.02) 34 35 P I L L Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L REMUNERATION REPORT (continued) SHARES UNDER OPTION G. Additional disclosure relating to key management personnel Shareholding The number of shares in the Company held during the year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: Director 2020 Terry Sweet Richard Lipscombe Ian Roger Moore Paul House (i) Balance at the start Received as part Other changes Balance at the end of the year of remuneration during the year of the year 2,348,000 19,011,204 627,000 - - - - 2,348,000 37,501 19,048,705 90,000 717,000 488,094 110,770 120,000 718,864 (i) On 1 October 2019 the Company issued 110,770 fully paid ordinary shares at $0.325 per share to Paul House in lieu of director fees covering the period November 2017 to September 2018. Option holding The number of options in the Company held during the year by each director and other members of the key management personnel of the consolidated entity, including their personally related parties, is set out below: Director 2020 Terry Sweet Richard Lipscombe Ian Roger Moore Paul House Balance at the start Received as part Other changed Balance at the end of the year of remuneration during the year of the year 400,000 - 200,000 200,000 - - - - - - 400,000 - - 200,000 - 200,000 H. Transactions with key management personnel The Company entered into the following transactions with key management personnel during the year: (i) Loans from directors There were no loans entered into with key management personnel during the year. Unissued ordinary shares of the Company under option as at 30 June 2020 are as follows: Date options granted 21/11/2018 21/11/2018 27/03/2020 11/05/2020 Expiry date 22/11/2021 22/11/2022 27/03/2023 1/05/2023 Exercise price Number under option $0.50 $0.67 $0.50 $0.50 400,000 400,000 3,040,279 550,000 4,390,279 No option holder has any right under the options to participate in any other share issue of the Company or any other entity. The options are exercisable at any time before the expiry date. Options that were converted into shares during the year was 750,000 (2019: 475,000). INSURANCE OF OFFICERS During the financial year, the Company paid a premium in respect of a contract insuring the Directors and Officers of the Company and any subsidiary against a liability incurred as a Director or Officer to the extent permitted by the Corporations Act 2001. Due to a confidentiality clause in the policy, the amount of the premium has not been disclosed. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the Company, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purposes of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001 . NON-AUDIT SERVICES The Company may decide to employ the auditor on assignments additional to their statutory audit duties, where the auditors' expertise and experience with the Company are important. Non-audit services provided by BDO Corporate Tax (WA) Pty Ltd during the 2020 financial year were in respect to consulting and amounted to $5,120 (Nil in 2019). (ii) Consultancy services Ian Roger Moore provided business development services in the amount of $2,065 (2019 $11,286) on terms no more favourable than those reasonably expected under arm's length dealings with unrelated persons. AUDITOR BDO Audit (WA) Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001 . THIS IS THE END OF THE AUDITED REMUNERATION REPORT AUDITOR'S INDEPENDENCE DECLARATION A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is attached. This report is made in accordance with a resolution of the Directors. Terry Sweet Chairman Perth, Western Australia Dated 31st August 2020 36 37 P I L L Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L Auditor’s Independence Declaration Financial Statements 38 39 P I L L Financial Statements Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2020 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020 Revenue from continuing operations: - Services - Research grants Other income - Interest income - Research and development tax incentive - Export and business development grants - COVID-19 grants and subsidies Total revenue from continuing operations Employment and labour expenses Share based payments expense Depreciation expense Intellectual property maintenance expenses Interest expense Interest expense - lease liabilities Laboratory supplies Professional fees Travel and marketing expenses Laboratory access fees Realised loss in foreign currency translation Loss on sale of investment Other expenses Total Expenditure Notes 5 2(a) 2(c) 1(h), 15 2(b) 2(b) Consolidated Entity 2020 $ Consolidated Entity 2019 $ 1,423,070 166,961 20,702 1,138,815 - 266,726 3,016,274 1,468,076 - 48,248 1,139,403 80,585 - 2,736,312 2,127,031 1,932,914 112,715 363,708 56,875 8,906 9,906 662,292 685,724 80,611 119,260 4,200 - 528,816 4,760,044 222,812 188,293 87,900 27,058 - 578,445 486,877 227,292 144,050 1,903 249,499 669,544 4,816,587 (Loss) before income tax ( 1,743,770) ( 2,080,275) Income tax (expense) / benefit 3(a) - - (Loss) after income tax from continuing operations ( 1,743,770) ( 2,080,275) Total comprehensive (loss) for the year attributable to equity holders of Proteomics International Laboratories Ltd ( 1,743,770) ( 2,080,275) Basic (loss) per share for the year attributable to the members of Proteomics International Laboratories Ltd Diluted (loss) per share 26 ( 0.02) N/A ( 0.03) N/A CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment Other assets Right-of-use assets Intangible assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Borrowings Lease liabilities Provisions TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Trade and other payables Borrowings Lease liabilities Provisions TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated (losses) TOTAL EQUITY Consolidated Entity 2020 $ Consolidated Entity 2019 $ Notes 4 6 7 9 7 8 10 12 13 11 10 12 13 11 14 16 17 2,365,022 364,587 1,387,997 4,117,606 1,308,277 - 127,825 1,012 1,437,114 5,554,720 447,688 - 63,799 110,984 622,471 334,803 - 69,044 90,501 494,348 1,116,819 1,511,430 501,395 1,229,700 3,242,525 213,677 163,681 - 1,012 378,370 3,620,895 303,064 146,591 - 99,424 549,079 - 18,330 - 67,184 85,514 634,593 4,437,901 2,986,302 13,391,543 1,054,100 ( 10,007,742) 4,437,901 10,537,267 713,007 ( 8,263,972) 2,986,302 The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. 40 41 P I L L Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2020 CONSOLIDATED STATEMENT OF CASH FLOW FOR THE YEAR ENDED 30 JUNE 2020 CONSOLIDATED ENTITY 30 JUNE 2020 Notes Issued Capital Ordinary $ Reserves $ (Accumulated Losses) $ Total Equity $ Balance at 1 July 2019 10,537,267 713,007 ( 8,263,972) 2,986,302 (Loss) for the year Other comprehensive income for the year Total comprehensive (loss) for the year - - ( 1,743,770) ( 1,743,770) - - - - - - ( 1,743,770) ( 1,743,770) Transactions with Equity Holders in their capacity as Equity Holders Equity issued net of share issue costs Conversion of Options Share based payments expense 14 14 2,631,198 223,078 1(h), 15 - 2,854,276 - - - - 341,093 341,093 - - 2,631,198 223,078 341,093 3,195,369 Balance as at 30 June 2020 13,391,543 1,054,100 ( 10,007,742) 4,437,901 CONSOLIDATED ENTITY 30 JUNE 2019 Notes Issued Capital Ordinary $ Reserves $ (Accumulated Losses) $ Total Equity $ Consolidated Entity 2020 $ Consolidated Entity 2019 $ Notes Cash flows from operating activities Receipts from customers, grants and other income COVID-19 grants and subsidy receipts Payments to suppliers and employees Interest paid Interest received Withholding tax paid on overseas locations Research and development tax incentive Net cash (outflow) from operating activities 4(a) Cash flows from investing activities Proceeds from sale of investment Payment for property, plant and equipment Right of use asset aquired Net cash inflow (outflow) from investing activities Cash flows from financing activities Proceeds from the issue of shares (net of costs) Proceeds from the conversion of options Loans to employees Repayment of lease liabilities Repayment of borrowings Net cash inflow (outflow) from financing activities 1,722,639 266,726 ( 3,496,673) ( 18,812) 20,702 ( 13,752) 1,134,662 ( 384,508) - ( 1,458,308) ( 127,825) ( 1,586,133) 2,823,576 223,078 ( 57,500) ( 68,800) ( 96,121) 2,824,233 1,648,633 - ( 4,171,235) ( 27,058) 48,248 - 834,403 ( 1,667,009) 928,399 ( 37,991) - 890,408 - 118,750 - - ( 147,500) ( 28,750) Balance at 1 July 2018 10,369,887 490,195 ( 6,183,697) 4,676,385 Cash and cash equivalents at 1 July 1,511,430 2,316,781 (Loss) for the year Other comprehensive income for the year Total comprehensive (loss) for the year - - ( 2,080,275) ( 2,080,275) - - - - - - ( 2,080,275) ( 2,080,275) Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at 30 June 4(a) 853,592 2,365,022 ( 805,351) 1,511,430 Transactions with Equity Holders in their capacity as Equity Holders Equity issues net of share issue costs Conversion of Options Share based payments expense 14 14 48,630 118,750 1(h), 15 - 167,380 - - - - 222,812 222,812 - - 48,630 118,750 222,812 390,192 Balance as at 30 June 2019 10,537,267 713,007 ( 8,263,972) 2,986,302 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. The above Consolidated Statement of Cash Flow should be read in conjunction with the accompanying notes. 42 43 P I L L Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (b) Segment Information The financial report of Proteomics International Laboratories Ltd and its subsidiary (the Company) for the financial year ended 30 June 2020 was authorised for issue in accordance with a resolution of the Directors on the 28th day of August 2020. The Company is a public company limited by shares incorporated and domiciled in Australia, and whose shares are traded on the Australian Securities Exchange. (cid:100)(cid:346)(cid:286)(cid:3)(cid:374)(cid:258)(cid:410)(cid:437)(cid:396)(cid:286)(cid:3)(cid:381)(cid:296)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:381)(cid:393)(cid:286)(cid:396)(cid:258)(cid:410)(cid:349)(cid:381)(cid:374)(cid:400)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:393)(cid:396)(cid:349)(cid:374)(cid:272)(cid:349)(cid:393)(cid:258)(cid:367)(cid:3)(cid:258)(cid:272)(cid:410)(cid:349)(cid:448)(cid:349)(cid:410)(cid:349)(cid:286)(cid:400)(cid:3)(cid:381)(cid:296)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:18)(cid:381)(cid:373)(cid:393)(cid:258)(cid:374)(cid:455)(cid:3)(cid:258)(cid:396)(cid:286)(cid:3)(cid:282)(cid:286)(cid:400)(cid:272)(cid:396)(cid:349)(cid:271)(cid:286)(cid:282)(cid:3)(cid:349)(cid:374)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:24)(cid:349)(cid:396)(cid:286)(cid:272)(cid:410)(cid:381)(cid:396)(cid:859)(cid:400)(cid:3)(cid:396)(cid:286)(cid:393)(cid:381)(cid:396)(cid:410)(cid:3)(cid:258)(cid:271)(cid:381)(cid:448)(cid:286)(cid:856) (a) Basis of preparation The principle accounting policies adopted for the preparation of financial statements are set out below. These accounting policies have been applied consistently to all periods presented unless otherwise stated. (i) Statement of compliance These general purpose financial statements have been prepared in accordance with the requirements of the Corporations Act 2001 , Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001 . The Company is a for profit entity for the purpose of preparing the financial statements. The financial statements of the Company also comply with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (ii) Basis of measurement The financial statements have been prepared on an accruals basis and are based on historical cost other than investments which are recorded at fair value. The financial statements are presented in Australian dollars and all values are rounded to the nearest dollar unless otherwise stated. (iii) Going Concern For the year ended 30 June 2020 the Company recorded a loss of $1,743,770 (2019: loss $2,080,275) and had net cash outflows from operating activities of $384,508 (2019: net cash outflows $1,667,009). The Directors believe there are sufficient funds to meet the Company's working capital requirements as at the date of this report for the following reasons: (cid:891) (cid:891) (cid:891) (cid:891) (cid:891) The current business development prospects show an increase in activity and should lead to increasing ongoing revenue; The Company has an excess of current assets over current liabilities of $3,495,135 as at 30 June 2020; The Research & Development tax incentive of $1,138,815, which has been recorded in other assets in the statement of financial position is expected to be received by October 2020; The Directors remain committed to the long-term business model which offsets the cash burn from research and development expenditure and product development through the continuing growth in analytical services revenue; and The budgets and forecasts reviewed by the Directors for the next twelve months anticipate the Company's operations will continue to produce improved results. AASB 8 - Operating Segments, requires a management approach under which segment information is presented on the same basis as that used for internal reporting purposes. This is consistent to the approach used for the comparative period. Operating segments are reported in a uniform manner which is internally provided to the chief operating decision maker. The chief operating decision maker has been identified as the Board of Directors. An operating segment is a component of the organisation that engages in business activity from which it may earn revenues or incur expenditure, including those that relate to transactions with other organisation components. Each operating (cid:400)(cid:286)(cid:336)(cid:373)(cid:286)(cid:374)(cid:410)(cid:859)(cid:400) results are reviewed regularly by the Board when making decisions about resources to be allocated to the segments and assess its performance, and for which discrete financial information is available. The Board monitors the operations of the Company as one single segment. The actual to budget items and a detailed profit or loss are reported to the Board to assess the Company's performance. The Board has determined that strategic decision making is facilitated by evaluation of the operations of the legal parent and subsidiary, which represent the operational performance of the (cid:18)(cid:381)(cid:373)(cid:393)(cid:258)(cid:374)(cid:455)(cid:859)(cid:400) revenues and the research and development activities as well as the finance, treasury, compliance and funding elements. (c) Estimates and judgements The preparation of the financial statements requires the use of accounting estimates and judgements which, by definition, will seldom equal the actual results. This note provides an overview of the areas that involve a degree of judgement or complexity in preparing the financial information. Facts and circumstances may come to light after the event which may have significantly varied the assessment used, and which may result in a materially different value being recorded at the time of preparing these financial statements. (i) (ii) (iii) (iv) (v) Deferred taxes Deferred tax assets have not been brought to account as it is not considered probable that the Company will make taxable profits over the next 12 months. The Company will make a further assessment at the next reporting period. Impairment of assets The Company assesses the impairment of assets at each reporting date by evaluating conditions specific to the asset that may lead to impairment. The assessment of impairment is based on the best estimate of future cash flows available at the time of preparing the report. However, facts and circumstances may come to light in later periods which may change this assessment if these facts had been known at the time. COVID-19 pandemic Judgement has been exercised in considering the impacts that the coronavirus SARS-CoV-2 and the COVID-19 pandemic (COVID-19) has had, or may have, on the Company based on known information. This consideration extends to the nature of the products and services offered, customers, supply chain, staffing and geographic regions in which the Company operates. Other than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the Company unfavourably as at the reporting date. The future impact and recovery from COVID-19 is unknown and it may have an impact on activities in relation to the commercial roll-out of the Company's PromarkerD diagnostic test and on receipt of revenue from licensing partners. Recoverability of Research & Development tax incentive The Company has registered its research and development activities with the Department of Industry, Innovation and Science. Therefore the Company is entitled to claim a tax incentive each year based on eligible research and development costs it incurrs and, based on successful claims in previous years, the Company expects that it will receive the amount calculated. Lease extensions The Company has entered into a facility licence agreement with the Harry Perkins Institute and does not expect any changes to the agreement in the next financial year. 44 45 Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 (g) Employee Benefits Liabilities for wages and salaries, including non-monetary benefits and accumulating sick leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service, and are recognised in respect of (cid:286)(cid:373)(cid:393)(cid:367)(cid:381)(cid:455)(cid:286)(cid:286)(cid:400)(cid:859) services up to the end of the reporting period, are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current liabilities in the statement of financial position, described as other payables, and comprise provision for annual leave and provision for long service leave. The liabilities for long service leave and annual leave that are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service, are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period of government bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. Re-measurements as a result of experience adjustments and changes in actuarial assumptions are recognised in the statement of profit or loss and other comprehensive income. Contributions to superannuation funds are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. (h) Share based payments Share-based payments compensation benefits are provided to employees, Directors and consultants via the issues of shares and/or options. The fair value of the shares and options granted as compensation benefits are recognised as a share based payments expense in the statement of profit or loss and other comprehensive income with a corresponding increase in equity in the statement of financial position. Share-based payments compensation benefits are provided to consultants for capital raising via the issues of shares and/or options. The fair value of the shares and options granted in relation to capital raisings are recognised as a share based payments expense in the statement of profit or loss and other comprehensive income and offset against equity in the statement of financial position as a transaction cost. (i) Foreign currency translation and transactions The financial statements are presented in Australian dollars. Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the statement of profit or loss and other comprehensive income. P I L L NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 (d) Principles of consolidation Subsidiaries Subsidiaries are all entities (including structured entities) over which the Company has control. The Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases. Intercompany Transactions Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Company. (e) Revenue recognition and other income Revenue is recognised when or as the Company transfers control of goods or services to a customer, at the amount to which the Company expects to be entitled. The following is a description of the principal activities from which the Company generates its revenue and other income: (i) Research grant and equivalent/other income including the Research & Development Tax Incentive Grants and other income are recognised at their fair value where it is probable that the grant and other income will be received. The Company is eligible to claim, and receive, a tax credit for its qualifying research and development activities (Research & Development tax incentive). The Research & Development tax credit received by the Company in the year amounted to $1,134,662. (ii) Revenue from contracts with customers - Commercialisaton of PromarkerD Revenue from commercialisation of PromarkerD is measured based on the consideration specified in a contract with a customer. The Company recognises revenue when it transfers control over a product or service to a customer. (iii) Revenue from contracts with customers - Sales of Analytical and Other Services Revenue from the provisions of analytical and other services is recognised in the accounting period in which the services are rendered. If services rendered by the Company exceed the payment received, a contract asset is recognised. If the payment received exceeds the services rendered, a contract liability is recognised. In some circumstances, analytical and other services are bundled together with provision of sales of services and products. The sale of products is a separate performance obligation and transaction price is allocated to the products and services on a relative stand- alone selling price basis. (iv) Federal and State COVID-19 grants and subsidies COVID-19 grants and subsidy receipts are recognised as other income rather than offsetting expenses to which they relate. (f) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the statement of profit or loss and other comprehensive income over the period of the borrowings using the effective interest method. Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. Borrowings are classified as current liabilities unless there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. 46 47 P I L L Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 (j) Income tax (m) Cash and cash equivalents The income tax expense or benefit for the year is the tax payable on that year's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: For the statement of cashflows presentation purposes, cash and cash equivalents also includes bank overdrafts, which are shown within borrowings in current liabilities on the statement of financial position. (i) (ii) When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities, and they relate to the same taxable authority on either the same taxable entity or different taxable entity's which intend to settle simultaneously. (k) Joint Arrangements The Company entered into a collaborative joint arrangement with the University of Western Australia ('UWA') during the year for the expansion and operation of the Western Australian Proteomics Facility. The collaboration arrangement is not structured through a separate entity. Both parties to the arrangement will operate independently with each party maintaining independent rights to the assets of the collaboration and liabilities resulting from activities under the arrangement will be several, and not joint or joint and several. The arrangement has therefore been classified as a joint operation and the Company recognises its direct right to the jointly held assets, liabilities, revenues and expenses in accordance with AASB 11 - Joint Arrangements. (l) Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is current when: (i) (ii) (iii) (iv) it is expected to be realised or intended to be sold or consumed in normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within twelve months after the reporting period; or the asset is cash or cash equivalent, unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. A liability is current when: (i) (ii) (iii) (iv) it is expected to be settled in normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within twelve months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non-current. (n) Trade and other receivables Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Trade receivables are usually due for settlement within 30 days and therefore are all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are then recognised at fair value. The Company holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest rate method. The Company applies the AASB 9 simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for all trade receivables and contract assets. To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to unbilled work in progress and have substantially the same risk characteristics as the trade receivables for the same types of contracts. The Company has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates for the contract assets. (o) Property, plant and equipment The Company's accounting policy for plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains or losses on qualifying cash flow hedges on foreign currency purchases of property, plant and equipment. Subsequent costs are included in the carrying amount of an asset or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. Depreciation is calculated on a diminishing value basis or prime cost basis, as appropriate, to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives. The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. Leasehold improvements and plant and equipment under finance lease are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter. (p) Leases The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. Management has adopted AASB 16 from 1 July 2019. As there were no operating leases at 30 June 2019, no adjustment to opening accumulated losses was necessary - refer Note 1(w), for all leases except for short-term leases and leases of low-value assets. Short -term leases and leases of low value, are charged to the statement of profit or loss and other comprehensive income on a straight-line basis over the term of the lease. 48 49 P I L L Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 (q) Trade and other payables (v) Goods and Services Tax (GST) and other similar taxes These amounts represent liabilities for goods and services provided to the Company prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. (r) Provisions Provisions are recognised when the Company has a present (legal or constructive) obligation as a result of a past event, it is probable the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. (s) Fair value measurement When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either in the principle market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interest. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed each reporting date and transfers between levels are determined based on a reassessment of the lowest level input that is significant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. (t) Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (u) Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of Proteomics International Laboratories Ltd, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in either other receivables or in other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the tax authority are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. (w) New Accounting Standards and Interpretations adopted The following Accounting Standards and Interpretations are most relevant to the Company and have been adopted in the preparation of financial statements: (cid:891) (cid:891) AASB 16 - Leases (AASB 16) International Financial Reporting Standard - IFRIC 23 AASB 16 Leases AASB 16 has been adopted from 1 July 2019. The standard replaces AASB 117 "Leases" and for lesees eliminates the classifications of operating leases and finance leases. Except for short-term leases and leases of low-value assets, right-of-use assets and corresponding lease liabilities are recognised in the statement of profit or loss and other comprehensive income. Straight-line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in depreciation expense) and an interest expense on the recognised lease liabilities (included in interest expense). For classification within the statement of cash flows, the interest portion is included in interest paid and the principal portion of the lease payments are separately dislosed as repayment of lease liabilites. Impact of adoption AASB 16 was adopted from 1 July 2019. There were no operating leases at 30 June 2019. The lease recognised in the financial statements is a new lease, and therefore no adjustment to opening accumulated losses was necessary. Right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease incentives received. Right-of-use assets are depreciated on a straight- line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Right-of-use assets are adjusted for any remeasurement of lease liabilities. Lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the net present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease, or if that rate cannot be readily determined, the Company's incremental borrowing rate. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the lease term or future lease payments arising froma change in an index or rate used. When a lease liability is remeasured, an adjustment is made to the corresponding right-of-use asset. Details of right-of-use assets are provided in note 8 and a maturity analysis of lease liabilities is provided in note 13. International Financial Reporting Standard - IFRIC 23 IFRIC 23 provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. The interpretation requires: (cid:891) (cid:891) (cid:891) The Company to determine whether uncertain tax treatments should be considered separately by each entity within the group, or together as a group, based on which approach provides better predictions of the resolution; The Company to determine if it is probable that the tax authorities will accept the uncertain tax treatment; If it is not probable that the uncertain tax treatment will be accepted, measure the tax uncertainty based on the most likely amount or expected value, depending on whichever method better predicts the resolution of the uncertainty. This measurement is required to be based on the assumption that each of the tax authorities will examine amounts they have a right to examine and have full knowledge of all related information when making those examinations. 50 51 P I L L Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 (x) New Accounting Standards not yet Mandatory 2. LOSS FOR THE YEAR In May 2019, the AASB issued a revised Conceptual Framework for Financial Reporting, to apply to periods beginning on or after 1 Jauary 2020. Whilst not an accounting standard, the new conceptual framework seeks to provide guidance and assistance in relation to: Loss for the full year included the following: Notes P I L L Consolidated Entity 2020 $ Consolidated Entity 2019 $ (cid:891) (cid:891) (cid:891) (cid:891) (cid:891) Concepts on presentation and disclosure, including classifying items as income vs other comprehensive income; Concepts on measurement, including factors to consider when selecting a measurement basis (eg cost vs fair value); Guidance on derecognition of assets and liabilities; Definitions of an asset and a liability; and Recognition criteria for including assets and liabilities in financial statements. The Company will incorporate the above in the preparation of financial statements commencing 1 July 2020. (a) Research & Development Tax incentive (i) 1,138,815 1,139,403 (b) Other expenses (income) Unrealised foreign exchange losses (gains) Realised foreign exchange losses Loss on investment (c) Employee and labour expenses Salaries and wages Other personnel costs Superannuation Increase in leave liabilities Share based payments expense 1(h), 15 4,200 9,978 - 1,805,722 114,776 172,112 34,421 2,127,031 112,715 2,239,746 ( 2,177) 1,903 249,499 1,631,377 96,743 153,934 50,860 1,932,914 222,812 2,155,726 (i) Research & Development Tax incentive The Company undertakes a substantial amount of research in its daily activities. The Company has registered its activities and is able to claim a tax incentive (rebate) each year based on eligible research and development costs incurred during a financial year. The amount of the incentive (rebate) is included as an income item in the consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2020, and the corresponding receivable included in the consolidated statement of financial position. The receipt of the tax incentive will occur in the year ended 30 June 2021. 3. INCOME TAX EXPENSE / (BENEFIT) (a) Income tax expense / (benefit) Current tax / (over provision in prior year) Deferred tax (b) Numerical reconciliation of income tax to prima facie tax Consolidated Entity 2020 $ Consolidated Entity 2019 $ - - - - (Loss) from continuing operations ( 1,743,770) ( 2,080,275) Tax at the Australia tax rate 27.5% (2019 27.5%) ( 479,537) ( 572,076) Tax effect of the amounts that are not deductible / (taxable) in calculating taxable income - Share based payments - Research and development tax incentive - Reduction in loss for tax incentive 30,997 ( 313,174) 761,714 - 61,273 ( 313,336) 824,139 - 52 53 Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L P I L L NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 3. INCOME TAX EXPENSE / (BENEFIT) (continued) (c) Tax losses Unused tax losses for which no deferred tax assets have been recognised Australian losses Potential tax benefit at 27.5% (2019 27.5%) Consolidated Entity 2020 $ Consolidated Entity 2019 $ 2,356,999 648,175 2,081,773 572,448 The tax benefits of the above deferred tax assets will only be obtained if: (i) the Company derives future assessable income of a nature and of an amount sufficient to enable the benefits to be utilised; (ii) (iii) the Company continues to comply with the conditions for deductibility imposed by law; and no changes in income tax legislation adversely affects the Company in utilising the benefits. (d) Unrecognised temporary differences Provisions Accruals Tax losses 4. RECONCILIATION OF CASH Cash at bank Deposits at call 987 34,271 2,356,999 2,392,257 ( 4,372) 50,860 2,081,773 2,128,261 Notes 2,315,022 50,000 2,365,022 461,430 1,050,000 1,511,430 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 5. REVENUE The Company has disaggregated revenue into various categories which is intended to: (cid:891) (cid:891) Depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors; and Enable users to understand the relationship with revenue information in the statement of profit or loss and other comprehensive income. Product Type PromarkerD Analytical Services Timing of Transfer of Goods and Services Point in time Over Time Primary Geographic Markets Australia and NZ USA (and Territories) Europe India SE Asia 6. TRADE AND OTHER RECEIVABLES Trade receivables Other receivables - GST Receivable Consolidated Entity 2020 $ - 1,423,070 1,423,070 Consolidated Entity 2019 $ 175,685 1,292,391 1,468,076 - 1,423,070 1,423,070 - 1,468,076 1,468,076 999,261 130,313 55,030 213,000 25,466 1,423,070 823,825 282,614 257,768 75,393 28,476 1,468,076 328,662 35,925 364,587 464,922 36,473 501,395 (a) Classification of trade and other receivables Trade receivables are amounts due from customers for services performed in the ordinary course of business. The trade receivables are generally due for settlement within 60 days and therefore are classified as current. Reconciliation of loss after income tax to net cash flows from operations activities (b) Fair value of trade and other receivables Loss for the year Depreciation Share based payments expense Share issue in lieu of cash payment Loans to employees Sale of investment in CPR Pharma Services Pty Ltd (Increase) / decrease in trade and other debtors (Increase) / decrease in other assets Increase / (decrease) in trade and other creditors Increase / (decrease) in provisions Refer to Note 18 for further information on risk exposure. 1(h), 15 ( 1,743,770) ( 2,080,275) 363,708 112,715 36,000 57,500 - 136,808 5,384 612,270 34,877 188,293 222,812 48,630 - ( 928,399) 101,875 816,267 ( 87,072) 50,860 ( 384,508) ( 1,667,009) 54 Due to the short-term nature of the current receivables, their carrying amount is assumed to be the same as their fair value. The Company has adopted the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. The expected credit loss is deemed to be $nil. Receivables includes service related revenue for which payment has been delayed due to the COVID-19 pandemic. Refer to Note 18 for further information on risk exposure. (c) (d) (e) 7. OTHER ASSETS Current: Research and development tax incentive (see note 2(i)) Export Market Development Grant Contract asset Unsecured Loans (i) Prepayments (ii) Non-current: Security Deposit - equipment leases (i) (ii) (iii) unsecured loans to selected employees comprises prepaid insurance and prepaid legal fees Refer to Note 18 for further information on risk exposure. $ $ 1,138,815 - 134,398 57,500 57,284 1,387,997 - - 1,139,403 54,749 - - 35,548 1,229,700 163,681 163,681 55 P I L L Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 8. RIGHT-OF-USE ASSET 11. PROVISIONS The Company entered into a facility licence agreement with the Harry Perkins Institute of Medical Research, whereby the Company was granted the right to occupy laboratory and office premises for a period of three years commencing 1 July 2019. The Company has recognised this as a right-of-use asset. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. Consolidated Consolidated Right-of-use asset Accumulated depreciation 9. PROPERTY, PLANT AND EQUIPMENT Cost (i) Accumulated depreciation Closing Net Book Value Reconciliation: Opening net book value Additions Disposals Depreciation charge Closing Net Book Value (i) includes capitalised leased assets 10. TRADE AND OTHER PAYABLES Current: Trade payables Other payables Deferred Grant Income - refer Note 1(k) Contract Liability - refer Note 13 Non-current: Deferred Grant Income - refer Note 1(k) Entity 2020 $ 191,737 ( 63,912) 127,825 2,257,098 ( 948,821) 1,308,277 213,677 1,394,396 - ( 299,796) 1,308,277 181,996 77,940 187,752 - 447,688 334,803 334,803 Entity 2019 $ - - - 844,379 ( 630,702) 213,677 363,979 37,991 - ( 188,293) 213,677 224,757 71,447 - 6,860 303,064 - - Current: Fringe Benefits Tax Employee benefits - annual leave Non-current Employee benefits - long service leave 12. BORROWINGS Current: Finance Leases (a) Non-current Finance Leases (a) (a) Finance Leases: Commitments in relation to finance leases are payable as follows: Within one year Later than one year but no later than five years Minimum lease payments Future finance charges Recognised as a liability Lease Liability - current Lease Liability - non-current Recognised as a liability Terms of the Finance Leases The company leased laboratory equipment under finance lease agreements. The security deposit held by the bank over this equipment was released back into the Company's cash flow. 13. LEASE LIABILITY The Company entered into a facility licence agreement with the Harry Perkins Institute of Medical Research, whereby the Company was granted the right to occupy laboratory and office premises for a period of three years commencing 1 July 2019. The Company has recognised a lease liability as at 1 July 2019 and at 30 June 2020. (a) Classification of trade and other payables Trade payable are unsecured and are usually paid within 60 days or recognition and therefore are classified as current. (b) Fair value of trade and other payables The carrying amount of trade and other payables are assumed to be the same as their fair value, due to their short-term nature. (c) Refer to Note 18 for further information on risk exposure. Current: Lease liability Non-current Lease liability 56 63,799 63,799 69,044 69,044 - - - - 57 P I L L Consolidated Consolidated Entity 2020 $ 456 110,528 110,984 Entity 2019 $ - 99,424 99,424 90,501 67,184 - - - - - - - - - - 146,591 18,330 155,142 18,889 174,031 ( 9,110) 164,921 146,591 18,330 164,921 Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L P I L L NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 14. ISSUED CAPITAL Ordinary Shares Total consolidated issued capital Movement in share capital Date Details 1/07/2019 1/10/2019 31/10/2019 25/11/2019 31/05/2020 30/06/2020 Opening balance Issue of shares (i) Exercise of options (ii) Issue of shares (iii) Exercise of options (iv) Less: Transaction costs Closing balance 2020 Shares 2019 Shares 2020 $ 2019 $ 92,405,875 80,686,965 13,391,543 10,537,267 Number of shares 2020 Amount $ 80,686,965 10,537,267 110,770 225,000 36,000 67,500 10,858,140 3,040,279 525,000 157,500 ( 447,003) 92,405,875 13,391,543 (i) (ii) (iii) (iv) Issued to Director Paul House in lieu of cash payment for director's fees and pursuant to the Director Fee Plan approved by shareholders. Employees exercised unquoted employee options pursuant to an Employee Incentive Option Plan. Issued following placement to new and existing institutional, sophisticated and professional investors. Employees exercised unquoted employee options pursuant to an Employee Incentive Option Plan. Date Details 1/07/2018 22/11/2018 3/12/2018 7/01/2019 22/01/2019 20/05/2019 20/06/2019 30/06/2019 Opening balance Issue of shares (i) Exercise of options (ii) Exercise of options (ii) Exercise of options (ii) Exercise of options (ii) Exercise of options (ii) Closing balance Number of shares 2019 $ 80,098,871 10,369,887 113,094 100,000 100,000 100,000 75,000 100,000 48,630 25,000 25,000 25,000 18,750 25,000 80,686,965 10,537,267 (i) (ii) Issued to Director Paul House in lieu of cash payment for director's fees and pursuant to the Director Fee Plan approved by shareholders. Consultant Canary Capital exercised 475,000 options during the year. Ordinary shares Ordinary shares entitle the holder to participate in dividends, and to share in the proceeds of winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the Company does not have a limited amount of authorised capital. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 15. OPTIONS (a) Options - Issued Options exercisable at $0.25 each Options exercisable at $0.30 each Options exercisable at $0.35 each Options exercisable at $0.50 each (iv) Options exercisable at $0.50 each Options exercisable at $0.50 each Options exercisable at $0.67 each (v) Total issued options Movement in options issued As at 1 July Exercised during the period Options lapsed during the period (i) Exercise of options during the period (ii) Options lapsed during the period (ii) Options lapsed during the period (i) Issued during the period (iv) Issued during the period (iii) Issued during the period (ii) Issued during the period (v) As at 30 June 2020 Options 2019 Options - - - 400,000 3,040,279 550,000 400,000 4,390,279 25,000 1,750,000 500,000 400,000 - - 400,000 3,075,000 2020 2019 Average exercise price $0.26 $0.25 $0.25 $0.30 $0.30 $0.35 - - $0.50 $0.50 $0.46 Number of Options 3,075,000 - ( 25,000) ( 750,000) ( 1,000,000) ( 500,000) - 3,040,279 550,000 - 4,390,279 Average exercise price $0.30 $0.25 $0.25 $0.30 $0.30 $0.35 $0.50 - - $0.67 $0.26 Number of Options 2,750,000 ( 475,000) - - - - 400,000 - - 400,000 3,075,000 Issued options outstanding at the end of the year have the following expiry date and exercise price: Grant Date 21/11/2018 (iv) 21/11/2018 (v) 27/03/2020 (iii) 11/05/2020 (ii) Expiry Date Exercise Price No. Options 22/11/2021 22/11/2022 27/03/2023 1/05/2023 $0.50 $0.67 $0.50 $0.50 400,000 400,000 3,040,279 550,000 (i) (ii) (iii) (iv) (v) Unlisted - issued to consultants, Canary Capital, for nil consideration and being for part consideration for services rendered. Unlisted - employee options issued to employees of the Company for nil consideration under an Employee Incentive Option Plan. Unlisted - issued to corporate advisors - Alto Capital & Adelaide Equity Partners for $0.00010 consideration. Unlisted - Director A options issued to Directors - Terry Sweet, Ian Roger Moore and Paul House - for nil consideration and issued as a reward and incentive. Unlisted - Director B options issued to Directors - Terry Sweet, Ian Roger Moore and Paul House - for nil consideration and issued as a reward and incentive. 58 59 P I L L NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 15. OPTIONS (continued) (a) Fair Value of Employee Options Particulars Number of employee options Valuation date Expiry date Underlying share price used Exercise price Risk-free rate Volatility Dividend yield Valuation per Option Input 550,000 11 May 2020 1 May 2023 $0.36 $0.50 0.24% 84% nil $0.1603 Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 15. OPTIONS (continued) (b) Options - Unissued Consultant Options - Candour Advisory Pty Ltd Consultant Options - Adelaide Equity Partners Limited (i) Consultant Options - Scintilla Funds Management Pty Ltd (i) Total Unissued options Fair Value of Consultant Options - Candour Advisory Pty Ltd P I L L 2020 Options 1,250,000 - - 1,250,000 2019 Options - 1,250,000 500,000 1,750,000 These Employee Options are valued at $88,177 and this amount is included in the share based payment expense for the year ended 30 June 2020. The Company has used the Black Scholes Model to value the Employee Options. (b) Fair Value of Corporate Advisory Options - Alto Capital and Adelaide Equity Partners Alto Capital and Adelaide Equity Partners Limited acted as lead manager and corporate advisor respectively to the $3.0 million share placement undertaken by the Company on 15 November 2019. The issue of these Corporate Advisory Options was announced to the ASX on 25 November 2019 at which time the Corporate Advisory Options were unissued, but valued at $328,623. On 27 March 2020, these Corporate Advisory Options were subsequently issued (ASX announcement 27 March 2020) by the payment of $0.0001 per option ($304). These Corporate Advisory Options were therefore revalued to be $228,074, and the details are as follows: Particulars Input Number of consultant options Valuation date Expiry date Underlying share price used Exercise price Risk-free rate Volatility Dividend yield Valuation per Option 3,040,279 27 March 2020 27 March 2023 $0.23 $0.50 0.275% 80% nil $0.0750 The value placed on these Corporate Advisory Options represents a cost in relation to the capital raising, and as such, this share based payment expense is included in share issue costs for the year ended 30 June 2020. The Company has used the Black Scholes Model to value the Corporate Advisory Options. The company agreed, pursuant to a corporate advisory mandate dated 24 April 2020, to issue a total of 1,250,000 unlisted options (Consultant Options) exercisable at $0.50 each on or before 24 April 2023. The issue of Consultant Options is subject to Proteomics International Laboratories Limited shares achieving a 20 day VWAP of $0.45. As at the date of this report, the Consultant Options remain unissued, and are valued as follows: Particulars Candour Advisory Pty Ltd Number of consultant options Valuation date Expiry date Underlying share price used Exercise price Risk-free rate Volatility Dividend yield Valuation per Option 1,250,000 24 April 2020 24 April 2023 $0.31 $0.50 0.27% 85% nil $0.0199 These options were granted in April 2020 and valued using a Barrier-up-and-in Trinomial Option Pricing model and vest over the vesting period of 3 years. (i) Consultant Options - Adelaide Equity Partners Limited and Scintilla Funds Management Pty Ltd The company agreed, pursuant to a corporate advisory mandate, the terms of which were announced to the ASX on 14 November 2018, to issue 1,250,000 unlisted options to Adelaide Equity Partners Limited and 500,000 unlisted options to Scintilla Funds Management Pty Ltd. The agreement with Adelaide Equity Partners Limited ended on 17 April 2020, and the entitlement to the 1,250,000 options also ended on 17 April 2020. The agreement with Scintilla Funds Management Pty Ltd ended on 30 June 2019, and the entitlement to the 500,000 options ended on 31 December 2019. (c) Share based payments expense Share based payments expense comprising: Director options Consultant options (refer Note 15a) Employee share scheme Consolidated Entity 2020 $ Consolidated Entity 2019 $ - 24,538 88,177 112,715 179,062 43,750 - 222,812 60 61 Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L P I L L NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 16. RESERVES (a) Share based payments reserve comprising: (i) Payments to consultants (ii) Employee share scheme (iii) Director A & B options (b) Option reserve (a) Share based payments reserve (i) Share based payments to consultants: Consolidated Entity 2020 $ Consolidated Entity 2019 $ 456,166 208,577 179,062 210,295 1,054,100 203,250 120,400 179,062 210,295 713,007 2020 Options 2019 Options 2020 $ 2019 $ Consultants - unlisted options 4,290,279 2,275,000 456,166 408,645 Movements in share based payments to consultants: Consultants - unlisted options Date 1/07/2019 17/07/2019 31/12/2019 8/03/2020 27/03/2020 17/04/2020 24/04/2020 30/06/2020 Date 1/07/2018 13/11/2018 3/12/2018 7/01/2019 22/01/2019 20/05/2019 20/06/2019 30/06/2019 Details Opening balance Options lapsed Options lapsed Options lapsed Issue of unlisted options Options lapsed Issue of unlisted options (refer Note 15 (a)) Closing balance Details Opening balance Issue of unlisted options Exercise of options Exercise of options Exercise of options Exercise of options Exercise of options Closing balance Refer to Note 15 for further information. Number of options 2,275,000 ( 25,000) ( 500,000) ( 500,000) 3,040,279 ( 1,250,000) 1,250,000 4,290,279 Number of options 1,000,000 1,750,000 ( 100,000) ( 100,000) ( 100,000) ( 75,000) ( 100,000) 2,275,000 $ 203,250 - - - 228,074 - 24,842 456,166 $ 159,500 43,750 - - - - - 203,250 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 16. RESERVES (continued) (ii) Employee share scheme Employee - unlisted options 2020 Options 550,000 2019 Options 1,750,000 2020 $ 208,577 2019 $ 120,400 Movements in employee share scheme: Employee - unlisted options Date 1/07/2019 31/10/2019 31/10/2019 31/05/2020 31/05/2020 11/05/2020 30/06/2020 Date 1/07/2018 30/06/2019 Details Opening balance Exercise of options Options lapsed Exercise of options Options lapsed Issue of unlisted options Closing balance Details Opening balance Closing balance Number of options 1,750,000 ( 225,000) ( 425,000) ( 525,000) ( 575,000) 550,000 550,000 Number of options 1,750,000 1,750,000 $ 120,400 - - - - 88,177 208,577 $ 120,400 120,400 Refer to Note 15 for further information. (iii) Director A & B options 2020 Options 2019 Options 2020 $ 2019 $ Director A & B - unlisted options 800,000 800,000 179,062 179,062 Movements in director A & B options: Director A & B - unlisted options Date 1/07/2019 30/06/2020 Date 1/07/2018 22/11/2018 22/11/2018 30/06/2019 Details Opening balance Closing balance Details Opening balance Issue of Director A options Issue of Director B options Closing balance Refer to Note 15 for further information. Number of options 800,000 800,000 Number of options - 400,000 400,000 800,000 $ 179,062 179,062 $ - 88,412 90,650 179,062 62 63 P I L L NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 16. RESERVES (continued) (b) Option reserve Total consolidated issued options - listed - - 210,295 210,295 2020 Option 2019 Option 2020 $ 2019 $ Movements in issued options: Consolidated issued options - listed Date 1/07/2019 30/06/2020 Details Opening balance Closing balance No options expired during the year ended 30 June 2020 Date 1/07/2018 30/06/2019 Details Opening balance Closing balance 17. ACCUMULATED LOSSES Opening balance Loss for the year Closing balance Number of options - - Number of options - - $ 210,295 210,295 $ 210,295 210,295 Consolidated Entity 2020 $ Consolidated Entity 2019 $ ( 8,263,972) ( 1,743,770) ( 6,183,697) ( 2,080,275) ( 10,007,742) ( 8,263,972) Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 18. FINANCIAL RISK MANAGEMENT The activities of the Company expose it to a variety of financial risks (including interest rate risk, credit risk and liquidity risk). The Company's overall risk management program focuses on the unpredictability of the financial markets and seeks to minimise potential adverse effects on the financial performance of the Company. However, the Company uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate risk and aging analysis for credit risk. At present the Company is not exposed to price risk. Risk management is carried out by the Board of Directors with assistance from suitably qualified external advisors where necessary. The Board provides written principles for overall risk management and further policies will evolve commensurate with the evolution and growth of the Company. The Company holds the following financial instruments: Financial assets Cash and cash equivalents Trade and other receivables (a) Loans to Employees Research & Development tax incentive (b) Financial liabilities Trade and other payables (c) Borrowings and lease liabilities Consolidated Entity 2020 $ Consolidated Entity 2019 $ 2,365,022 463,060 57,500 1,138,815 4,024,397 1,511,430 683,352 - 1,139,403 3,334,185 ( 782,491) ( 132,843) ( 915,334) ( 303,064) ( 164,921) ( 467,985) (a) excludes GST receivables and prepayments (b) the receipt of the Research & Development tax incentive will occur in the year ending 30 June 2021 (c) excludes GST payable and employee benefits The main purpose of the financial instruments is to fund the Company's operations. It is, and has been throughout the period under review, the Company's policy that no trading in financial instruments for the purpose of limiting exposure to operational risk shall be undertaken. The main risk is cash flow (interest rate risk, liquidity risk and credit risk). The Board reviews and agrees policies for managing each of these risks and they are summarised below: (a) Market Risk (i) Cash flow and interest rate risk The Company's only interest rate risk arises from cash and cash equivalents held. Term deposits and current accounts held with variable interest rates expose the Company to cash flow interest rate risk. The Company does not consider this to be material and has therefore not undertaken any further analysis of risk exposure. 64 65 P I L L Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 18. FINANCIAL RISK MANAGEMENT (continued) 18. FINANCIAL RISK MANAGEMENT (continued) The following sets out the Company's exposure to interest rate risk, including the effective weighted average interest rate by maturity periods. (c) Liquidity Risk Details Note Weighted Average Interest Rate Total $ 30 June 2020 Consolidated Financial assets Cash and cash equivalents 30 June 2019 Consolidated Financial assets Cash and cash equivalents 0.89% 2,365,022 3.19% 1,511,430 All other financial instruments have either a zero coupon rate or a fixed interest rate. Sensitivity At 30 June 2020, if interest rates had increased by 0.25% or decreased by 0.25% from the year end rates with all other variables held constant, post-tax loss for the year would have been $1,552 lower / ($1,552) higher (2019 changes of 0.25% / 0.25%: $6,636 lower/ ($6,636) higher), mainly as a result of higher / lower interest income from cash and cash equivalents. (ii) Foreign currency risk The Company is exposed to movements in foreign exchange due to the number of clients that the Company currently works with overseas. The Company does not currently hedge its exposure to foreign currency sales and therefore the impact on the financial statements at year end for foreign currency movements is below: Exposure Trade receivables 30 June 2020 USD 213,748 JPY - 30 June 2019 USD 182,520 JPY 240 Sensitivity The sensitivity of the profit or loss to changes in exchange rates arising in mainly USD/AUD denominated financial instruments and the impact of the other components of equity is listed below: USD/AUD exchange rate - increase 5% USD/AUD exchange rate - decrease 15% (b) Credit risk Impact on post tax profits 2020 2019 $ $ ( 11,571) ( 14,803) 29,580 54,861 Impact on equity 2020 $ 2019 $ 14,803 ( 54,861) 11,571 ( 42,915) Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as including outstanding receivables and committed transactions. For banks and financial well as credit exposures to retail customers, institutions, only independently rated parties with a minimum rating of 'A' are accepted. Otherwise, if there is no independent rating, the board assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The compliance with credit limits by customers is regularly monitored by the Managing Director. Sales to retail customers are required to be settled in cash (in part, in advance) or using major financial institutional payment processes, to mitigate credit risk. Financial assets Cash and cash equivalents The Company's financier has an AA Moody's rating. Consolidated Entity 2020 $ Consolidated Entity 2019 $ 2,365,022 1,511,430 Prudent liquidity risk management implies maintaining sufficient cash balances and access to equity funding. The Company's exposure to the risk of changes in market interest rates relates primarily to cash assets and floating interest rates. The Company does not have significant interest-bearing assets (other than cash) and is not materially exposed to changes in market interest rates due to the unprecedented low interest rates. The Directors monitor the cash-burn rate of the Company on an ongoing basis against budget. As at the reporting date the Company had sufficient cash reserves to meet its requirements. The Company has no access to credit standby facilities or arrangements for further funding or additional capacity in its borrowing arrangements. The financial liabilities the Company had at reporting date were trade payables incurred in the normal course of the business. These were non-interest bearing and were due within the normal 30-60 days terms of creditor payments. Maturities of financial liabilities The table below analyses the Company's financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. (i) Assessment of contractual cash flows Contractual maturities of financial liabilities As at 30 June 2020 Non-derivatives Non-interest bearing Trade payables Interest bearing Borrowings Lease Liability Total non-derivative Contractual maturities of financial As at 30 June 2019 Non-derivatives Non-interest bearing Trade payables Interest bearing Borrowings Total non-derivative Less than 6 Months $ 6 - 12 Months $ Between Between 1 and 2 years $ 2 and 5 years $ Total Contractual Cash Flows $ Carrying Amount $ 181,996 - - - 35,016 217,012 - 35,016 35,016 - 71,292 71,292 - - - - 181,996 181,996 - 141,324 323,320 - 132,843 314,839 Less than 6 Months $ 6 - 12 Months $ Between Between 1 and 2 years $ 2 and 5 years $ Total Contractual Cash Flows $ Carrying Amount $ 224,757 - - 87,228 311,985 67,914 67,914 18,889 18,889 - - - 224,757 224,757 174,031 398,788 164,921 389,678 (ii) Financing arrangements The Company has a $50,000 overdraft facility with its financial institution in place as at 30 June 2020. 66 67 Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 18. FINANCIAL RISK MANAGEMENT (continued) (d) Fair Value Estimation The fair value of financial assets and liabilities must be estimated for recognition and measurement and for disclosure purposes. The carrying value less impairment provision of receivables and trade payables are assumed to approximate their fair values due to their short-term nature. (e) Capital management When managing capital, the Board's objective is to ensure the Company continues as a going concern was well as to maintain optimal returns to shareholders and benefits for other stakeholders. The Board also aims to maintain a capital structure that ensures the lowest cost of capital available to the Company. The Board is constantly adjusting the capital structure to take advantage of favourable costs of capital or high return on assets. As the market is constantly changing, the board may issue new shares, sell assets to reduce debt or consider payment of dividends to shareholders. The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position although there is no formal policy regarding gearing levels. There were no changes in the Company's approach to the capital management during the year ended 30 June 2020. The Company is not subject to any externally imposed capital requirements. Class of share Country of Incorporation Equity Holding 2020 2019 % % 19. CONSOLIDATED ENTITIES Name of entity Accounting Parent Proteomics International Pty Ltd Legal Parent Proteomics International Laboratories Ltd NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 20. REMUNERATION OF AUDITORS (a) Audit services - BDO Audit (WA) Pty Ltd (b) Non-audit services - BDO Corporate Finance - BDO Corporate Tax (WA) Pty Ltd (i) P I L L Consolidated Entity 2020 $ Consolidated Entity 2019 $ 47,454 43,848 - 5,120 - - (i) Consulting services have been provided by BDO Corporate Tax during the year ended 30 June 2020. 21. COMMITMENTS Laboratory access fees Within one year Later than one year but no later than five years Later than five years 22,000 - - 22,000 48,700 - - 48,700 22. RELATED PARTIES (a) Key management personnel (KMP) compensation Short-term employee benefits Post-employment benefits Director A and B Options The directors of the Company comprise the key management personnel. Compensation is paid to the directors individually. (b) Options disclosure to KMP's 376,000 58,636 - 434,636 337,915 35,471 179,062 552,448 Australia 100 100 The disclosure that relates to options terms and conditions and the valuation inputs can be found at Note 14. Ordinary Australia - (c) Transactions with KMP's During the year ended 30 June 2020, consultancy services were provided by Ian Roger Moore for business development in the amount of $2,065 (2019 $11,286) on terms no more favourable than those reasonably expected under (cid:258)(cid:396)(cid:373)(cid:859)(cid:400) length dealings with unrelated persons. No loans were provided by Key Management Personnel during the year ended 30 June 2020. The Company has no formal financing and gearing policy or criteria having regard to the early status of its development and low level of activity. The Company pays fees to access strategic locations to use laboratories and specialised equipment to undertake its operations. 68 69 P I L L Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 June 2020 23. DIVIDENDS 28. PARENT ENTITY INFORMATION The directors have not paid or declared a dividend during the financial year ended 30 June 2020. 24. CONTINGENT LIABILITIES The Company is not aware of any material contingent liabilities for the year ended 30 June 2020. 25. SEGMENT REPORTING The Board monitors the operations of the Company as one single segment. The actual to budget items and a detailed profit or loss are reported to the board to assess the performance of the Company. The Board has determined that strategic decision making is facilitated by evaluation of the operations of the legal parent and subsidiary which represent the operational performance of the (cid:18)(cid:381)(cid:373)(cid:393)(cid:258)(cid:374)(cid:455)(cid:859)(cid:400) revenues and the research and development activities as well as the finance, treasury, compliance and funding elements of the Company. 26. LOSS PER SHARE (loss) attributable to ordinary shareholders Consolidated Entity 2020 $ Consolidated Entity 2019 $ ( 1,743,770) ( 2,080,275) Weighted average number of ordinary shares* 87,415,789 80,326,284 The following information relates to the legal parent entity, Proteomics International Laboratories Ltd, as at 30 June 2020. The information presented here has been prepared using consistent accounting policies as presented in Note 1. Current assets Non-current assets Total Assets Current liabilities Non-current liabilities Total Liabilities Total Equity (Loss) for the year Other comprehensive income / (loss) for the year Total comprehensive (loss) for the year Contingent liabilities of the parent entity The Company is not aware of any material contingent liabilities for the year ended 30 June 2020. Commitments of the parent entity 2020 $ 2019 $ 4,510,692 - 2,893,557 163,681 4,510,692 3,057,238 72,791 - 72,791 70,936 - 70,936 4,437,901 2,986,302 ( 203,348) ( 561,941) - - ( 203,348) ( 561,941) Loss per share ( $0.02) ( $0.03) Other than as decribed at Note 13, the Company does not have any other on-going commitments. *Includes the effect of the transactions (under continuation accounting) for the purpose of the comparative earnings per share calculation. 27. EVENTS OCCURRING AFTER THE REPORTING PERIOD On 27 July 2020, Proteomics International announced that the Company has secured patents for PromarkerD for the potentially substantial markets of Brazil, which has 16.8 million adults with diabetes, and Canada, which has 2.8 million. Together the Company's granted patents and trademarks cover 273 million (59%) of the addressable diabetes patient population globally. The impacts of the coronavirus SARS-CoV-2 and the COVID-19 pandemic (COVID-19) on the Company's operations is being monitored. It is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is changeable and is dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided. Other than the above, there have been no subsequent events which would have a material effect on the Company's operations. 29. INTERESTS IN OTHER ENTITIES The Company does not currently have any interests in other entities. 30. DEED OF CROSS GUARANTEE The Company has not currently entered into a deed of cross guarantee. 31. ASSETS PLEDGED AS SECURITY The Company has no assets that have been pledged as security. 70 71 P I L L Directors’ Declaration The Directors of the Company declare that: Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L Independent Auditor’s Report 1. The financial statements, comprising the consolidated statement of profit or loss and other comprehensive income, consolidated statement of financial position, consolidated statement of cash flow, consolidated statements of changes in equity, accompanying notes, are in accordance with the Corporations Act 2001 and: (a) (b) comply with Accounting Standard, the Corporations Regulations 2001, other mandatory professional reporting requirements; and give a true and fair view of the financial position as at 30 June 2020 and the performance for the year ended on that date of the consolidated entity; and (c) comply with International Financial Reporting Standards as disclosed in Note 1. 2. 3. In the Directors' opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. The remuneration disclosures included in the Directors' Report (as part of the Remuneration Report) for the year ended 30 June 2020 comply with Section 300A of the Corporations Act 2001 . 4. The Directors have been given the declarations by the Managing Director required by Section 295A of the Corporations Act 2001 . This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the directors by: Terry Sweet Chairman Perth, Western Australia Dated: 31 August 2020 72 73 P I L L Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L Independent Auditor’s Report Independent Auditor’s Report 74 75 P I L L Shareholder Information Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L 76 77 P I L L Proteomics International Laboratories Ltd Proteomics International Laboratories Ltd P I L L Glossary ACR and eGFR Albumin Creatinine Ratio (ACR) is a urine test and the estimated Glomerular Filtration rate (eGFR) is a blood test, each used for the diagnosis of chronic kidney disease. AUC/ROC curve Area Under the Curve (AUC) in a receiver operating characteristic (ROC) curve, is a graphical plot that illustrates the performance of a classifier system. Biologics Biomarker Biosimilars The conventional interpretation of the clinical significance of the ROC curve AUC is: >0.7 acceptable discrimination; >0.8 excellent discrimination; > 0.9 outstanding discrimination. Medicinal protein products manufactured in or extracted from biological sources. A measurable indicator of a state or condition, usually relating to early phase of diseases; a biological signature. Protein-based molecules that are biological medical products made to mimic an original drug. Complementary diagnostic (CDx) A complementary diagnostic is a test that aids in the benefit-risk decision making about the use of the therapeutic product for a given patient, where the difference in benefit-risk is clinically meaningful. Diabetes A group of metabolic diseases associated with high blood sugar levels. Diabetic kidney disease (nephropathy) A progressive disease of the kidneys caused by diabetes and leading to the malfunction of the kidneys and ultimately renal failure. Drug discovery The process of testing new molecules in the search for new therapeutic molecules. End stage renal disease (ESRD) Immunoassay Mass Spectrometry Kidney failure or ESRD is the final stage of kidney disease. Kidney failure means the use of dialysis or transplantation is required for survival. Diabetes is the most common cause of ESRD. A procedure for detecting or measuring specific proteins or other substances through the use of antibodies. The measurement of the mass to charge ratio of a molecule such as a peptide in order to determine its chemical structure. Negative Predictive Value (NPV) The probability that people who get a negative test result truly do not have the disease. In other words, it is the probability that a negative test result is accurate. Odds Ratio (OR) A measure of association between two events. It can be used to determine whether a particular exposure is a risk factor for a particular outcome. In clinical research it gives direct information to doctors about which treatment approach has the best odds of benefiting the patient. Positive Predictive Value (PPV) The probability that a patient with a positive (abnormal) test result actually has the disease. Probability (P) The P value, or calculated probability, that an observation is true. Most authors refer to statistically significant as P < 0.05 and statistically highly significant as P < 0.001 (less than one in a thousand chance of being wrong). Proteomics The large-scale study of protein structure and function. Sensitivity (true positive rate) The ability of a test to correctly identify those with the disease. Specificity (true negative rate) The ability of the test to correctly identify those without the disease. 78 79 Why are proteins important? Genomes are static - the genes we are born with are the genes we die with, but the protein make up in our bodies differs from cell to cell and changes considerably over time. Cells use the instructions in our genes to make proteins. Proteins are the operational molecules of life and carry out the functions of living organisms. The caterpillar and the butterfly have exactly the same genome. The proteins that their cells make are why they are different. Looking at the differences in protein composition can tell us about the state of life, and health, of any organism. Proteomics is the study of proteins on an industrial scale. www.proteomicsinternational.com D e s i g n : i C a s t l e d n e & C a s t l e d n e i P I L L Proteomics International L A B O R AT O R I E S LT D

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